Trading up is hard to do
Today, a follow-up on the story of a young family that I worked with this year. They are selling their too-small starter home and buying a bigger long-term family home.
They cleared out their house for showing. It looked good, but was far less functional. The printer was stowed away, because the desk went into storage. Their three-year old asked, when she couldn’t find something, “Mommy, is it in the Pod [temporary storage module]?”
Things went well. They had a buyer for the small house and chose a bigger one. Both loan commitments were committed: the buyer’s for their little house and theirs for their big house.
Two weeks before closing, they had their temporary housing lined up and were in the middle of lining up the contractors for the before-we-move repairs.
Their worries are over, right? Well, not 100 percent!
It is rare to find a seller who will accept a buyer’s offer if the offer includes a contingency for the sale of their current home. Some will accept an offer which has a loan commitment contingent on the sale of a current home. There’s a difference.
If an offer is contingent on the sale of the buyer’s current home, then the buyer can get his/her deposits back if the sale of the current home falls through for any reason. The failure of their buyer to get a loan is the most obvious reason; that is covered in the loan commitment being contingent on the sale of the current home. But, there are two more: the house can sustain serious damage or the current home could have a title problem.
The first problem is out of the trade-up buyer’s hands: Earthquakes happen, but not so much here. The second problem -- failure to clear title -- can be prevented. Do an early title search to find any defects before the eleventh hour.
My clients had a two-week period from their loan commitment date until closing when they needed to pray for clement weather and steady ground. They closed without incident. It was a reasonable risk, in their opinion and that of their attorney.
Did you trade up? If you did, what contingencies did you have, loan commitment or sale of the first house?
