How can we sell our condo and buy a house?
December 8, 2011 1:46 PM   Subscribe

How can we sell our condo and buy a house?

My S.O. bought a condo last January. It's worth $330,000, paid $230,000 down. We have two dogs and are planning on having a child so we're looking for a single family house that's a little bigger. Still looking around the same price. We found a foreclosure that is listed for $320,000. We had a friend tell us we can't turn around and sell our house before owning it for 3 years. Both of us have excellent credit but most of our cash is tied up in the condo. I'd like to know what our options are. Is there an option to swap our house for the foreclosure w/ the bank? Should we just put it on the market and see if we can sell it?
posted by no bueno to Home & Garden (15 answers total)
I think you need to consult someone with more legal and real estate expertise than "a friend" about the ramifications of selling your current home. There may be tax and other implications to selling, but given the number of people who have made a living flipping houses, I find it hard to believe that there's a law obligating you not to sell your condo. Please consult a real estate attorney licensed in your jurisdiction.
posted by decathecting at 1:50 PM on December 8, 2011 [2 favorites]

I could be wrong but i think you have to pay a fee or something like that if you sell your house before 2 years.

Flippers i think build that fee into their price when they resell the house.
posted by majortom1981 at 1:52 PM on December 8, 2011

Yes we're already in touch w/ a realtor about the place and other ramifications but I wanted other inputs. MeFi always seems to help.
posted by no bueno at 1:53 PM on December 8, 2011

You should speak with an attorney regarding the question of whether you can sell your condo. I'd be surprised if you can't but perhaps there is some condo association by-law requiring you to hold the condo for a set period of time before trying to sell it, in order to dissuade flippers, etc.

Also, you don't know what your condo is worth until someone has made an offer for it and transferred money from their account to yours. Don't assume the condo is worth $330k until you have that amount of money in hand. A house or apartment is worth what someone will pay for it, not what its assessed value or purchase price is.
posted by dfriedman at 1:54 PM on December 8, 2011

Why does your friend believe that you can't turn around and sell your house before owning it for 3 years? Is that supposedly a restriction on the mortgage, a restriction imposed by the condo association, or just something that will hurt your credit rating?

I've never heard of that before. You should make sure your friend is right by talking to an attorney before worrying about this any more.
posted by alms at 2:04 PM on December 8, 2011 [1 favorite]

Fundamentally, you find someone to buy the condo, sell it to them for $330,000, and then pay off the $100,000 you still have outstanding on the loan. Then you take your leftover $230,000 and use it as a down payment on the new house.

This is pretty much the most standard real estate deal in the world so if your realtor can't figure this out, you should get a new one.
posted by tylerkaraszewski at 2:06 PM on December 8, 2011

Obviously we're not familiar with the terms of your mortgage, so there could be something there involving penalties or restrictions. The only other "3 year" deadline that comes right to mind is the tax credit for first-time homebuyers who must maintain it as their primary residence for three years or else they must repay their tax credit. Does that sound familiar?
posted by asciident at 2:12 PM on December 8, 2011 [2 favorites]

Hmm. She didn't get the credit but I'm wondering if that's what her friend was thinking of. The only other solution I could come up w/ was her HOA possibly limiting it but I wasn't sure if they could do that.
posted by no bueno at 2:17 PM on December 8, 2011

I believe majortom1981 is talking about capital-gains tax rules, which do specify a 2-year inhabitation. You may get a tax penalty, yes, but there's nothing saying you can't sell your condo now.
posted by MrMoonPie at 2:19 PM on December 8, 2011 [2 favorites]

Also, don't forget that you're going to lose 4% to 6% to realtor fees. Also keep in mind the fees you'll pay to purchase a new house. I wouldn't think the Capital Gains tax penalty would be big, because you're probably taking a loss, but consult someone who knows what they're talking about.
posted by cnc at 2:27 PM on December 8, 2011

Your friend might also be confused with mortgage terms requiring you to live in the property as your primary residence for X number of months after entering into the mortgage--if you violate this clause the bank has the option of calling the entire note due. It's not an uncommon clause in mortgages and generally, simply means you can't rent out the property to someone else but must live in it yourself as your primary residence--it does not mean that you can't sell the property. Lenders sometimes do not enforce this clause all together, but it is usually in mortgages because the lenders offer different terms for mortgages on primary residences than they do on secondary residences or rental properties. Terms for mortgages on primary residences are generally much more favorable than the terms of mortgages on other types of homes.
posted by crush-onastick at 2:40 PM on December 8, 2011

You can sell your condo but there are tax repercussions for owning it less than two years; you'll have to pay capital gains on any profit. There are realtor fees, however, you might see if you can work with one realtor for the sale of your condo and the purchase of the house. Most realtors will cut their fee because they're doing two deals.

The fees associated with buying the new place will be the closing costs. Make sure this house makes sense for your planned needs so that you're not doing this again in a year. You're lucky the condo is worth more than you paid for it. Talk to a realtor and find out how long condos like yours typically stay on the market in the area.

The only real estate swaps I've seen are for investment properties, called 1031 exchanges.
posted by shoesietart at 4:53 PM on December 8, 2011

its not an option to rent the condo out?
posted by pyro979 at 5:52 AM on December 9, 2011

Interesting story. I used to live in a condo with my SO. We talked about buying a house (this was during the 1st time home buyer credit), but decided we would wait a little longer. One thing thats nice is my SO worked in the morgage industry. Randomly, my SO took some pictures of the condo and listed it on She looked at some other condos and listed it at what we thought we would be lucky to get. The next day she gets an email from someone who is interested. He came and looked at our condo (after we cleaned it up of course) within a few days. A week later he brought his family to come look at the place. At this point, he wanted the condo for sure. We said he should take a little bit of time and to think things through. I would say a week after that, we negotiated a price at our kitchen table and he signed the documents. My SO had printed all the necessary documents from her work. We set a closing date about a month later. All said and done, from a random craigslist posting to having him sign probably took 2 - 3 weeks at most. Of course since this happened so fast, we didn't haven't had much time at all to start looking for houses. We eventually had to move into my SOs parents house while we looked for a house. We finally found one and have been living it for about 2 years now.

So my suggestion would be craigslist. I know it sounds off because its something you buy used furniture from, but you never know what you can sell and buy. Plus you wouldn't have to do any agent fees.
posted by amazingstill at 6:13 AM on December 9, 2011

Yea I was actually considering the Craigslist option since that's how we currently got it rented out but selling sounded a little more daunting. Thanks everyone else for the input. I believe the exchange I was thinking of was the 1031.
posted by no bueno at 2:35 PM on December 13, 2011

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