i am about 4 months away from our listing our house. over the next couple of months, after the holiday, we will spend time and money into our primary to position ourselves as best as we can be with regards to the highest sale price. new paint, upgrade bathroom vanities, upgrade laundry room, fix this, fix that, etc...
the sale price is going to govern our budget for our next house. i feel we can sell our house 270k and i figure we can net 260k from the sale price?! ( our mother in law is the real estate agent and she will waive any commission on her end...what should we expect to net off a sale price of 270k in new jersey??) if we can net 260k, we should have a clean 100k left over after we payoff our mortgage. that 100k will be our down payment for our next home which will place our next home's budget within the 350-400k sale price...
the X factor is my wife is pregnant with our second child. she is one month pregnant. i know there are alot of variables with selling and buying real estate. i am trying to plan and budget and coordinate and navigate all options that will allow us to sell our home, buy another home before my next child is home from the hospital.
how does this work? how should i approach this? should i get a pre-approval letter from my loan rep, make an offer on a house contingent on selling my primary? should i be as upfront as possible with both buyers of my primary home and sellers of my next home begging and pleading to close as soon as possible to each other so i can avoid being homeless and renting with a preggo wife lol?
what governs the close date with real estate transactions...lenders, correct? how can i evaluate the strength of my buyers offer besides the amount they want to pay...meaning can i ask to speak to their lender to see how tight their credit/DTI/bank statements are....last thing i would want is my buyer's loan falling thru two weeks before i close. the domino effect would prevent my sale, which would prevent my buy bla bla bla i need a drink!
i really dont want to sell, then rent for 6 months, then buy but that is always an option....last resort option but its there.
thanks in advance
Being up front with your buyers and sellers is very important in this situation.I'm not sure about PA or NJ but in NY we write our contracts so that the buyer of your home and seller of your new home are OK with either having a double closing or closings near each other. Other options can include living in your current property after closing while paying an agreed-upon rent as you wait to close on your next property. The closing dates are usually agreed upon by both attorneys, at least thats how it usually happens in NY. Lenders simply give the "clear to close" letting all parties involved (buyer, seller, agents, attorneys, title rep) know that a closing can be scheduled.
Your agent will be responsible for vetting your buyers to make sure they have a pre-approval and can even ask for proof of funds. I understand your concern here! You definitely don't want someone who BARELY qualifies to be your top offer. If interest rates go up or if their credit drops just a bit, you could have just lost a few months and could also lose out on your next property.
As far as the lending side is concerned, I'd speak to a lender about executing a 1031 exchange. This will allow you to use the funds from your sale to purchase a more expensive property while avoiding paying capital gains tax on your sale profits.
Best of luck to you and CONGRATULATIONS on the addition to your family!
Not sure exactly on the situation in Phila, but here, what I do is the following:
- Get your Mother in law to tell you what the home will sell for and how much commission the buyers agent will take
- Go to your lender and ask what you can be pre approved for assuming you have no house debt and the down payment from your sale. be sure to calculate all costs, so you know what you'll actually have
- get your home ready and put it on the market
- once you get an offer, counter with a higher deposit for protection and a completion that suits your needs
- now go into the wild and find your new home
- once it is found, secure a completion that is before yours
- if the buyer of your home bails, you'll have the deposit as some sort of security (on a 300k home, 15k is reasonable)
Alternatively, you could simply flip a few of those steps. go buy a home first and set a longer completion, which will then give you time to sell your home.
Also, depending on your income, you could qualify for both homes and then sell your first at your leisure. you will buy the second home as a primary, which should lesson the down payment and then your lender can use your first home as a rental and use the income to offset the debt. don't worry about finding a renter, they should be able to create a rental report. again not certain on the us, but i suggest you find a good mortgage broker who can strategize with you. In Canada their fees are paid by the bank (usually) so there is no cost.
Hope so of this helps. Also suggest against using the mother in law, even if it saves some cash. you should search out a real professional. only reason why i assume she isn't, is because she should have provide this information to you and linked you up with people who could make this work. At least interview a few others and it wont hurt her feelings as she isn't netting any coin anyway.
all the best,
You can't do a 1031 exchange on a residence, only on investment property.
Even if your MIL waives her commission, the buyer's agent won't. Figure 3% to the buyer's agent and another 2% for seller's closing costs (primarily owner's title policy for the buyer). So, about $13,500 for your $270K house. Your MIL should be able to give a better estimate, based on costs involved in your area. Its always painfully surprising how many various fees and charges will crop up and eat your money. I'd use no more than $255K for a working estimate.
Something that will be slightly confusing is you will have to pay property taxes up to the date of the closing. You will actually have that money in the escrow account with your existing loan. But, lenders typically apply the escrow balance to the loan payoff and that reduces your loan payoff. So, you will end up having that money show up as a debit on your side of the settlement statement and as a credit to the buyer's side. This should be a wash with the reduced loan payoff but more money to the seller, but it may leave you scratching your head.
Closing delays are common. Trying to coordinate two closings to happen at the same time is likely to be difficult. It is possible to make your purchase contingent on the sale of your existing house. That may weaken your offer, though. Your MIL should be able to give you an idea of whether or not that will fly. In strong seller's markets, sellers will just discard offers with a contingency like that.
Depending on your finances, you may be able to get approved and buy a new place before the old one closes. That's always scary. I've done it a couple of times and it gets stressful wondering if the old place is ever going to close. But that is a way to avoid having to move twice.
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