How does one buy a house in a semi complicated situation?
February 12, 2013 7:27 AM Subscribe
Fell in love with a house. Currently own a house. Want to grab this potential house fast yet as of today, didn't prequalify yet, didn't put up current house for sale, don't have a broker to look for mortgages, etc. I have bonds to cash in for a down payment on the next house but just don't know how to get the ball rolling so fast. What steps do I need to take to make sure I'm not getting over my head too fast? I'm bad with change (esp. involving money) and am freaking out on what to do, how much to cash in, were to find a broker, etc.
Anything I need to know regarding selling? My home is my first home (been there 11 years). Worse case scenario, will probably break even with sale. I have zero clue if a seller is responsible for closing costs on both houses, just the one we're buying or selling, what percentage does a realtor get? Do I have to pay the realtor who showed the new house?
The potential house is absolutely perfect and don't want to lose it with the process taking up time. But also feel odd making such a huge move, so fast, when current house didn't sell. Do banks look bad upon 2 temporary mortgages? This is only going under my name so I'm freaking about 2 mortgages along with other costs for moving, living, etc.
Realtors generally get 6%, and the seller pays*. If you have a buyer's agent (you SHOULD! It doesn't cost you any extra, the seller's agent and yours split that 50/50), they can help you navigate all the legal and procedural details you need to deal with. The buyer generally pays the closing costs, because virtually all of them only affect/benefit the buyer (things like the appraisal, the inspections, various fees associated with the mortgage itself, the title transfer, etc).
That said, jumping into a house on short notice does not count as a really terrific idea. Basically, unless you can realistically afford the mortgage, taxes, and upkeep on two houses at once - Don't do this.
* Obviously the buyer "pays" for it one way or another, but the list price doesn't change based on you having an agent on your side, so take advantage of that!
posted by pla at 7:35 AM on February 12, 2013 [2 favorites]
That said, jumping into a house on short notice does not count as a really terrific idea. Basically, unless you can realistically afford the mortgage, taxes, and upkeep on two houses at once - Don't do this.
* Obviously the buyer "pays" for it one way or another, but the list price doesn't change based on you having an agent on your side, so take advantage of that!
posted by pla at 7:35 AM on February 12, 2013 [2 favorites]
Could you rent out the first house for more than your monthly payment on it, and do your mortgage terms and conditions allow you to do that?
posted by Dansaman at 7:35 AM on February 12, 2013
posted by Dansaman at 7:35 AM on February 12, 2013
Fell in love with a house.
Fall out of love. You are not in a comfortable position for this even if you can do the financial gymnastics to make it happen.
Falling in love with things is never wise. There will be other houses. Take your time, learn how the process works, line up your ducks, and then go look at dozens of houses before you choose one. This is a buyer's market and you already have a home. You can make this happen with practically zero stress if you take your time and do your homework.
posted by headnsouth at 7:36 AM on February 12, 2013 [1 favorite]
Fall out of love. You are not in a comfortable position for this even if you can do the financial gymnastics to make it happen.
Falling in love with things is never wise. There will be other houses. Take your time, learn how the process works, line up your ducks, and then go look at dozens of houses before you choose one. This is a buyer's market and you already have a home. You can make this happen with practically zero stress if you take your time and do your homework.
posted by headnsouth at 7:36 AM on February 12, 2013 [1 favorite]
If you do make an offer on the new house, put a contingency in the offer/contract that makes the purchase of the new house contingent on the sale of your current house. The seller may balk. You may have to pay more or even lose the sale entirely. It's better than carrying a mortgage on a house you don't want, for months if not years until it sells.
Trust me on that.
posted by payoto at 7:47 AM on February 12, 2013 [5 favorites]
Trust me on that.
posted by payoto at 7:47 AM on February 12, 2013 [5 favorites]
We did the following in the same situation. We put an offer on the new house contingent on selling the current house but with a very long close period - 6 months. During the 6 months we agreed to rent the new house from the seller at market rate. This allowed us to move our of our current house and prepare it for sale in what was a very down market.
The main benefit of this approach is that it bounds your top-end risk. The worst case is that you fail to sell your current house for a price you're comfortable with in the 6 months. In that case your contingent offer on the new house expires and you're out 6 months rent. Ideally you move into the new house ASAP, you prep your current house for sale, your current house sells sooner than 6 months, done and done. At no point would you carry two mortgages.
The benefit to the seller of accepting an offer like this is that they get money immediately. Rather than waiting 60-90 days for the close, you start paying rent day 1. This may be enough to offset the risk of accepting a contingent offer with a long close date.
The maximum financial downside to you is 6 months rent, assuming that the contract is structured to return your deposit should your house fail to sell.
posted by true at 7:53 AM on February 12, 2013 [5 favorites]
The main benefit of this approach is that it bounds your top-end risk. The worst case is that you fail to sell your current house for a price you're comfortable with in the 6 months. In that case your contingent offer on the new house expires and you're out 6 months rent. Ideally you move into the new house ASAP, you prep your current house for sale, your current house sells sooner than 6 months, done and done. At no point would you carry two mortgages.
The benefit to the seller of accepting an offer like this is that they get money immediately. Rather than waiting 60-90 days for the close, you start paying rent day 1. This may be enough to offset the risk of accepting a contingent offer with a long close date.
The maximum financial downside to you is 6 months rent, assuming that the contract is structured to return your deposit should your house fail to sell.
posted by true at 7:53 AM on February 12, 2013 [5 favorites]
We did the above approach in Chicago, looking at your profile that may be applicable to your situation.
posted by true at 7:55 AM on February 12, 2013
posted by true at 7:55 AM on February 12, 2013
Best answer: There's a house on every corner. You're not in love, you're in lust. There's something that appealed to you and it rang your bell.
Have you done a house search, or did you see this one and just there and then decide that it had to be your own?
Do yourself a favor, slow your roll.
If you're serious about getting a new house, go looking at comparable houses in the area. You may find an even better house at a better price. If you don't, at least you can say you did your due diligence.
Secondly to answer your questions.
1. The seller pays the real estate commission of 6%.
2. The buyer pays the closing costs on the house being purchased. (In some negotiations, you can ask the seller to give you money towards closing, and/or you can be asked as the seller to kick in closing costs.)
3. Before putting your house on the market you need to stage it. It's madness to do otherwise. What this entails:
A. Depersonalizing completely. Family pictures packed away. Ditto your shot glass collection, ditto your clutter, ditto all that crap on the fridge. It has to look sterile.
B. It has to BE sterile! Paint all rooms the same neutral color, paint the trim and doors. Fix anything broken. Boil the house clean. Clean the carpets, or if they're beyond hope, replace them with something nice and neutral. (People have no imagination and won't be able to see beyond that grape juice stain, or the embedded dirt. Even if you offer money towards new flooring, they just won't.)
C. Update any outdated fixtures. Anything with a gold or brass finish, anything that's not in vogue right now. If you have mid-century modern stuff, this is the exception. Make it as pretty as you can. People like me lose their minds for pink bathrooms with starburst light fixtures.
D. Update your curtains and bedding. Don't go nuts in the expense. Go to Ikea and get plain white blinds, and nice, clean, new bedding.
E. Keep the house looking like a show home until you sell.
4. As for cashing your bonds. Call Fidelity or Vanguard and tell them you want to open an account and ask them how to deposit your bonds. Once deposited, you can sell them. Depending on how you acquired them, and how much you've made on them, you may need to pay capital gains taxes, or some other kind of income tax. Consult with your accountant. Do this whether or not you buy the other house. That way it's all done and ready for you, should you need to move quickly in the future.
If you have US Savings Bonds, you can take them to your bank and they'll cash them for you.
5. Get a mortgage broker to see if you qualify for the new house, you may not. Then this is all moot. You can go through Lending Tree or Quicken Loans if you want to engage quickly.
There are things called "Bridge Loans" which is what you have when you have two mortgages. These are for when the deal for selling your house is taking place after the closing of your new house. It bridges the two mortgages together temporarily.
6. You can put a contingent offer on the house (if you absolutely must). Your purchase is contingent upon your selling your existing house. Sellers hate this, and I'd never sell a house with this contingency. But I might if I were desperate. Give it a try.
7. Find a real estate agent to sell your house. He/she can also represent you in the purchase of your new house. He/she can also show you other houses that are comparable to the one you're in love with. Make them work for you! In every neighborhood, there are agents who are KNOWN to be good at selling in the area. We have a guy in our neighborhood. He sold the house across the street from us in 5 days. We're in Atlanta, a rather tepid housing market. I'm kind of impressed. As neighbors first, or see who in your neighborhood seems to have the most signs up. See a few people; you want to work with someone who is professional, personal and honest. You'll know your agent is honest if they tell you the truth about that hideous collection of Hummels. If you bring the agent along on the purchase deal, you might get him/her down on the commission of the sale of your house, aim for 4%, settle for 5%.
8. You want to work with people who will teach you what you want to know. Ask a bazillion questions, challenge anything that doesn’t make sense. Be dispassionate!
9. Get a good inspection. Don't necessarily go with who your realtor recommends, go with a ASHI inspector. A good inspection will cost anywhere from $500 to $1,000, depending on the size of the house. Do this ESPECIALLY on new construction. Arrange for the inspector to reinspect prior to closing to verify that all issues have been addressed (don't just take the owner or builder's word for it!)
posted by Ruthless Bunny at 8:05 AM on February 12, 2013 [13 favorites]
Have you done a house search, or did you see this one and just there and then decide that it had to be your own?
Do yourself a favor, slow your roll.
If you're serious about getting a new house, go looking at comparable houses in the area. You may find an even better house at a better price. If you don't, at least you can say you did your due diligence.
Secondly to answer your questions.
1. The seller pays the real estate commission of 6%.
2. The buyer pays the closing costs on the house being purchased. (In some negotiations, you can ask the seller to give you money towards closing, and/or you can be asked as the seller to kick in closing costs.)
3. Before putting your house on the market you need to stage it. It's madness to do otherwise. What this entails:
A. Depersonalizing completely. Family pictures packed away. Ditto your shot glass collection, ditto your clutter, ditto all that crap on the fridge. It has to look sterile.
B. It has to BE sterile! Paint all rooms the same neutral color, paint the trim and doors. Fix anything broken. Boil the house clean. Clean the carpets, or if they're beyond hope, replace them with something nice and neutral. (People have no imagination and won't be able to see beyond that grape juice stain, or the embedded dirt. Even if you offer money towards new flooring, they just won't.)
C. Update any outdated fixtures. Anything with a gold or brass finish, anything that's not in vogue right now. If you have mid-century modern stuff, this is the exception. Make it as pretty as you can. People like me lose their minds for pink bathrooms with starburst light fixtures.
D. Update your curtains and bedding. Don't go nuts in the expense. Go to Ikea and get plain white blinds, and nice, clean, new bedding.
E. Keep the house looking like a show home until you sell.
4. As for cashing your bonds. Call Fidelity or Vanguard and tell them you want to open an account and ask them how to deposit your bonds. Once deposited, you can sell them. Depending on how you acquired them, and how much you've made on them, you may need to pay capital gains taxes, or some other kind of income tax. Consult with your accountant. Do this whether or not you buy the other house. That way it's all done and ready for you, should you need to move quickly in the future.
If you have US Savings Bonds, you can take them to your bank and they'll cash them for you.
5. Get a mortgage broker to see if you qualify for the new house, you may not. Then this is all moot. You can go through Lending Tree or Quicken Loans if you want to engage quickly.
There are things called "Bridge Loans" which is what you have when you have two mortgages. These are for when the deal for selling your house is taking place after the closing of your new house. It bridges the two mortgages together temporarily.
6. You can put a contingent offer on the house (if you absolutely must). Your purchase is contingent upon your selling your existing house. Sellers hate this, and I'd never sell a house with this contingency. But I might if I were desperate. Give it a try.
7. Find a real estate agent to sell your house. He/she can also represent you in the purchase of your new house. He/she can also show you other houses that are comparable to the one you're in love with. Make them work for you! In every neighborhood, there are agents who are KNOWN to be good at selling in the area. We have a guy in our neighborhood. He sold the house across the street from us in 5 days. We're in Atlanta, a rather tepid housing market. I'm kind of impressed. As neighbors first, or see who in your neighborhood seems to have the most signs up. See a few people; you want to work with someone who is professional, personal and honest. You'll know your agent is honest if they tell you the truth about that hideous collection of Hummels. If you bring the agent along on the purchase deal, you might get him/her down on the commission of the sale of your house, aim for 4%, settle for 5%.
8. You want to work with people who will teach you what you want to know. Ask a bazillion questions, challenge anything that doesn’t make sense. Be dispassionate!
9. Get a good inspection. Don't necessarily go with who your realtor recommends, go with a ASHI inspector. A good inspection will cost anywhere from $500 to $1,000, depending on the size of the house. Do this ESPECIALLY on new construction. Arrange for the inspector to reinspect prior to closing to verify that all issues have been addressed (don't just take the owner or builder's word for it!)
posted by Ruthless Bunny at 8:05 AM on February 12, 2013 [13 favorites]
Response by poster: Thank you. This is helpful, esp. Ruthless Bunny's on the process itself--whether this house or the next. We absolutely want to move/sell this house. The area I am in love with and yes, I've seen many houses equal or less price that I'm happy with. This house just made things more serious about actually moving on selling the existing house. We just rennovated our current house. EVERYTHING in it is new--bathrooms, doors, kitchen, floors, appliances, furnace, air. Not out of wanting but 1) selling and 2) everything was just falling apart (house was built in 1985).
Again, very helpful. I don't know how anyone goes through a sale and buying another.
posted by stormpooper at 8:28 AM on February 12, 2013 [1 favorite]
Again, very helpful. I don't know how anyone goes through a sale and buying another.
posted by stormpooper at 8:28 AM on February 12, 2013 [1 favorite]
Response by poster: Totally, totally agree and this is helpful. Thank you for your insight. I just put the big ol breaks on this but looks like getting my ducks in a row this month will hopefully lead to a sale by the end of the year. House poor is exactly the situation I do not want to be in.
posted by stormpooper at 8:54 AM on February 12, 2013 [1 favorite]
posted by stormpooper at 8:54 AM on February 12, 2013 [1 favorite]
If this house is "meant to be" it will still be around once you've done all of your preparation. If it's no longer available, you'll find another one that you'll love just as much.
posted by Ostara at 9:51 AM on February 12, 2013 [1 favorite]
posted by Ostara at 9:51 AM on February 12, 2013 [1 favorite]
Is bridging finance an option? You'd need to discuss this with your bank(s). Keep in mind bridging finance is very (very) expensive & also don't discount the advice from others for slow, sound decision making.
posted by Under the Sea at 10:37 AM on February 12, 2013 [1 favorite]
posted by Under the Sea at 10:37 AM on February 12, 2013 [1 favorite]
Response by poster: I rather not bridge. I rather get rid of our current home, meaning we need to chillax.
posted by stormpooper at 10:45 AM on February 12, 2013
posted by stormpooper at 10:45 AM on February 12, 2013
Response by poster: Follow up: So happy. Went for a showing. It was hideous. :)
posted by stormpooper at 6:05 AM on February 14, 2013 [1 favorite]
posted by stormpooper at 6:05 AM on February 14, 2013 [1 favorite]
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Take a month or two to get prepared and make an offer if it's still around.
posted by zug at 7:29 AM on February 12, 2013 [19 favorites]