Buying a Home

[Shooby]

I am curious. If you currently own a home and then wish to move or purchase another, do you usually buy on contingency of selling your current home? Or, if you find what you want, do you just purchase it upfront and then list your home but not buy on contingency? What would you consider the pros and cons of each.

[gooddecisions]

We've rented out 3 previous residences at this point. Renters have always moved in the weekend we move out.

When I was a kid, my parents would just move us all into an apartment and store the excess furniture until they closed or finished building. I thought it worked fine because it was summer and there was always a pool, but does mean moving twice.

But, yes- you could have a contingency. My inlaws moved into their new house 8 months ago and still haven't sold their old house. It's been very stressful for them. They dropped the sells price from $325K to $265K and finally have an offer, but with a contingency on the sell of the buyer's current residence. So, it's a risk that could be more stressful then just selling, moving into temporary housing and then buying.

[Shooby]

A home has come up that we are very interested in. We may just buy it, move in and then really spruce up our home and list it. I find that much less stressful and having the time to really spruce up our current home might pay off. But, there always the fear of the unknown like some big stock market crash. However, our current home is paid off and no mortgage so if worse came to worse, we could rent it.

[Shooby]

If we would sell first and move into temp housing and buy, then most likely the home we have just found will be sold. I live in a small town and there isn't a lot to offer so we might never find another we like better than our current home. So, the only real options for us are to just buy it and then sell ours. Or, buy it on contingency and then then if ours didn't sell, then just let that go.

[Deleted]

all depends.   my current house I qualified for the new mortgage while still having the old mortgage so I bought the house non-contingent on selling my house.  once my contract was approved, I put my townhouse on the market (it sold in 2 days).  when I bought the townhouse, it was a seller's market and nobody would take a contingent contract. 

if you want the house and can qualify/carry both mortgages, then buy it. 

[gooddecisions]

Nov 2, 2014 9:01:41 GMT -5 Shooby said:

A home has come up that we are very interested in. We may just buy it, move in and then really spruce up our home and list it. I find that much less stressful and having the time to really spruce up our current home might pay off. But, there always the fear of the unknown like some big stock market crash. However, our current home is paid off and no mortgage so if worse came to worse, we could rent it.

This was my inlaws as well. They thought it would be no big deal because their previous home was paid off. They've spent almost a year now of energy and money "sprucing" it up. And, still had to reduce the price significantly to finally be done with it. And, they still aren't done with it because the contract they have has a 120 day contingency for the buyer to sell their current home. They've found managing two properties to be a huge burden and expense. But, it might be easier for you.

[Shooby]

Good point. There is the possibility it won't sell as well. So yes that definitely has to be factored.

[gooddecisions]

It might go great for you. The market in my area has not been easy since 2008 unless you list your price really, really low and your place has all the latest and greatest updates. That's not the case with every market. Crunch your numbers and make sure you'd be fine covering real estate taxes, insurance, lawn maintenance and time for trips back and forth to keep it up. My inlaw's riding lawn mower was also stolen since the place was vacant. There was no way they would have anticipated that. So, that made it even harder for them to keep up with maintenance. The additions and improvements they made they thought they would be able to recoop in the sales price. They were wrong.

[Shooby]

Thank you. Great points. Fortunately my current home is very visable near the kindergarten. And it is an avg house in a desirable section of town with many functional updates like new roof , siding , high energy furnace etc. So that should have appeal
Also we redid the kitchen and it looks great. Actually better than the home we are looking at. But the new home has a better design for us now.

[Shooby]

I guess I need to think about how I am thinking about it. If we buy on contigency and our current home doest sell then are we going to buy this other home anyway? And yes we most likely would. So if so then I really dont need to buy on contigency.

Life is always a risk. Just trying to appraise the risks and be smart. There has been a nice uptick in our market.

[gooddecisions]

You'll probably be fine. In the anecdotal case of my in laws, they just didn't anticipate their place being on the market so long and the continued reductions. Their place isn't that old and they are the original owner. Financially they could carry it and have even offered seller financing.

Prior to building their new home, they haven't had a mortgage in 10+ years. So, now they have a mortgage, plus the taxes, insurance and upkeep on their old property. They thought their old property would sell fast and they could immediately use that money to pay off their new home and maintain their low overhead. They've now had a mortgage for over a year and are stressed out about it- but can't pay it off until their old home sells. Also, as with buying any new home, they've had to buy new furniture and stuff for it= more expenses and they are just not used to hemorrhaging so much money/month.

[Bonny]

I've only tried buying on contingency once. DH and I had been looking for two years and a house four doors up the street (but a different subdivision) came on the market. We found ourselves in a bidding war with our neighbors across the street! This was 1995 and we were crawling out of the 1990s recession.

I was working part-time but the day I got my full-time offer I re-submitted our offer non-contingent and the folks across the street had 72 hours to remove their contingency. They couldn't. I was pretty sure they wouldn't because they had priced their house too high. It was a smart move as houses in this little in-fill area rarely come on the market. When we moved to AZ in 2003 nothing came on the market for 11 years.

We rented the house when we moved to AZ in 2003. Frankly I wasn't too sure I could go from 60 degree summers to 115 degrees.

We also rented out the AZ house in 2009 when we moved to Germany. At the time we thought we would eventually return. That was a good decision too. Values have bounced back nicely. Had we sold I think we might have gotten about $450k in 2009. Now it's back up to about $700k.

As you point out, every decision means trade-offs. Given the limited choice of inventory and your financial situation I would buy first and plan on putting my house on the market Spring of 2015.

[Shooby]

Thank you Bonny for your advice and perspective. I think a lot of it depends on your personal comfort as well. There is a psychological component to having your old home unsold. There is uncertainty and that makes people nervous. And, also, of course in buying a new home, I am thinking of some reasonable ball park price for my current home which I may or may not get. Lots of unknowns. However, moving is very expensive and the costs to sell and then rent with 5 of us and wait for a nice home to come up would be bigger crapshoot. Generally, the best way to find a home around here is to read the Obits and look at the address and wait to see if that one comes up. Sounds a bit morbid and it is but that is kind of the reality.
DH and I are at the point of our lives that we know exactly what we want. And, we want a more modern home and this town is full of old homes and Victorian homes.

[Deleted]

Nov 2, 2014 12:52:09 GMT -5 @patstab said:

Most agencies I have used with will not write a contract on a house as a contingency. The seller waits and waits and sometimes the contract for you selling your house falls through, so they pulled theirs off the market for months for nothing.

Now if its paid for and you can handle the new mortgage and bills that's different story. 

We have been fortunate to pay cash so has not been an issue for us

a realtor is ethically required to present any offer a buyer wants to write, they can't not write it and present it. 

[taz157]

Nov 2, 2014 14:04:43 GMT -5 @singlemominmd said:

Nov 2, 2014 12:52:09 GMT -5 @patstab said:

Most agencies I have used with will not write a contract on a house as a contingency. The seller waits and waits and sometimes the contract for you selling your house falls through, so they pulled theirs off the market for months for nothing.

Now if its paid for and you can handle the new mortgage and bills that's different story. 

We have been fortunate to pay cash so has not been an issue for us

a realtor is ethically required to present any offer a buyer wants to write, they can't not write it and present it. 

[taz157]

We have done both examples with our previous homes (MD & N FL). We purchased our N FL home in Dec 2006 with no contingencies on our MD home. Our MD home sold in Apr 2008 (yes, 18 months after being initially placed on the market). DOUBLE MORTGAGES SUCKED!!!! For the MD home, the market did also suck at the time and our home wasn't in the best condition to sell in hindsight. We did do some improvements while it was on the market too. We were super excited when it sold!

We learned a lesson with the MD home so when we listed our N FL home, we made sure everything that needed to be done was done before the house was listed. Needless to say, DH was finishing the kitchen's backsplash the morning we listed the house. Also, we had a contract in 2 days with that home too. When we sold our N FL when we moved south, there was a home contingency on the person that purchased the home; however, they were already through the major hangups (e.g., appraisal, inspection, etc.) when they put in the contract. DH and I accepted the contract and we closed a month later. When we purchased our current home, we put a contingency on this house too, but our prior home was already through the major hangups (e.g., appraisal, inspection, etc.) and they accepted. We closed a month later.

For our latest move, DH was promoted which moved us south. He had rented an apartment that we lived in once DD and I joined him. The majority of our stuff was in storage once we cleaned out the old house and before we were ready to bring it down south.

[Deleted]

Nov 2, 2014 15:54:43 GMT -5 @patstab said:

Maybe so but where we were they didn't want to do it. I think the seller could refuse it if they did. Can't remember now.

as was said, they may not want to do it, but they have no choice unless they want to be reported to the licensing board.  and of course the seller could refuse it - the seller can refuse or counter any offer presented to them.

[Bonny]

Nov 2, 2014 16:08:12 GMT -5 @singlemominmd said:

Nov 2, 2014 15:54:43 GMT -5 @patstab said:

Maybe so but where we were they didn't want to do it. I think the seller could refuse it if they did. Can't remember now.

as was said, they may not want to do it, but they have no choice unless they want to be reported to the licensing board.  and of course the seller could refuse it - the seller can refuse or counter any offer presented to them.

The seller can also appoint his agent to screen his/her offers. As long as the instructions are in writing it's not against the law.

[Deleted]

Nov 2, 2014 16:16:40 GMT -5 Bonny said:

Nov 2, 2014 16:08:12 GMT -5 @singlemominmd said:

as was said, they may not want to do it, but they have no choice unless they want to be reported to the licensing board.  and of course the seller could refuse it - the seller can refuse or counter any offer presented to them.

The seller can also appoint his agent to screen his/her offers. As long as the instructions are in writing it's not against the law.

yes but the original point was that the buyer's agent is required to present any and all offers the buyer wants to write. Patstab said in her area she didn't think they would write those offers.  both taz and I pointed out they don't have the option to not write them.

[Blonde Granny]

If I was the seller, I wouldn't accept an offer that had a contingency written into it. When we sold our house last year and were going to build a new one, we had the house configured and the lot chosen but made it clear to the builder we would not close or start construction until the money from our house was in the bank.

We spent a little over 3 months in an executive apartment and moved when the house was complete.

[Deleted]

I'm guessing they can advise on whether an offer is likely to be rejected though...

[Bonny]

Nov 2, 2014 11:56:32 GMT -5 Shooby said:

Thank you Bonny for your advice and perspective. I think a lot of it depends on your personal comfort as well. There is a psychological component to having your old home unsold. There is uncertainty and that makes people nervous. And, also, of course in buying a new home, I am thinking of some reasonable ball park price for my current home which I may or may not get. Lots of unknowns. However, moving is very expensive and the costs to sell and then rent with 5 of us and wait for a nice home to come up would be bigger crapshoot. Generally, the best way to find a home around here is to read the Obits and look at the address and wait to see if that one comes up. Sounds a bit morbid and it is but that is kind of the reality.
DH and I are at the point of our lives that we know exactly what we want. And, we want a more modern home and this town is full of old homes and Victorian homes.

I moved MIL into the house for 7 months. After she left we spent about two weeks fixing things and painting. I staged it with some of our antique furniture pieces. Put it on the market and sold it at my open house. Didn't even get the For Sale sign up.

[Deleted]

Nov 2, 2014 16:35:49 GMT -5 @patstab said:

We sold every house we had pretty quickly.  The only one was the last one we sold, it took longer then we thought.

No I would never take a contract contingent on sale, I've turned down a lot of those.

what if your house had been on the market for 6 months and the one and only offer you got was contingent on the buyer's selling their house?

[gooddecisions]

Nov 2, 2014 16:40:48 GMT -5 @singlemominmd said:

Nov 2, 2014 16:35:49 GMT -5 @patstab said:

We sold every house we had pretty quickly.  The only one was the last one we sold, it took longer then we thought.

No I would never take a contract contingent on sale, I've turned down a lot of those.

what if your house had been on the market for 6 months and the one and only offer you got was contingent on the buyer's selling their house?

This is my inlaws. They are not thrilled about accepting an offer with a 120 day contingency, but 8 months on the market and 2 reductions later- they're taking it and hoping it works out. I hope it does, too because if January comes and goes and the buyer falls through because their house doesn't sell, back to square one for my in laws.

[thyme4change]

We bought our house on a whim.  We weren't out looking, but always loved this neighborhood.  When we saw it come up, our old house wasn't in shape to sell.  So, we put in a low ball offer on this house, and decided not to burden it with a contingency, especially since we wouldn't be able to get our house on the market for at least 2 weeks.  I am pretty sure our offer would have been outright rejected had we included a contingency.  Her real estate agent now lives on our street (he didn't at the time) and he has filled us in on her thoughts of us and our offer - they aren't all together rosey.  I felt a little bad about it for a couple of years, but now that we have been here for 13 years - I'm hoping she is over it. 

We owned 2 houses for a little less than 5 months.  Our mortgage payment was about $700, so it cost us ~$5K extra or so to get into this house.  I am sure we wouldn't have been able to get a similiar house in this neighborhood for the same price.  We bought at the lowest the market was, and although a few houses did sell for less than what we paid - they were either in need of tons or work, or were much smaller and/or were on smaller lots.  Even after the crash 4 years later, houses that were not livable were selling for $80k more than we bought for.  It was totally worth it.

[Bonny]

Nov 2, 2014 16:46:42 GMT -5 gooddecisions said:

Nov 2, 2014 16:40:48 GMT -5 @singlemominmd said:

what if your house had been on the market for 6 months and the one and only offer you got was contingent on the buyer's selling their house?

This is my inlaws. They are not thrilled about accepting an offer with a 120 day contingency, but 8 months on the market and 2 reductions later- they're taking it and hoping it works out. I hope it does, too because if January comes and goes and the buyer falls through because their house doesn't sell, back to square one for my in laws.

They are priced too high.

How does the house show?

If you clean up the house, make it easy to show (vacant on lockbox is best) and price it to sell you will have an offer within 30 days.

I would be concerned in their case that the contingent house is also overpriced.

[thyme4change]

Nov 2, 2014 16:46:42 GMT -5 gooddecisions said:

Nov 2, 2014 16:40:48 GMT -5 @singlemominmd said:

what if your house had been on the market for 6 months and the one and only offer you got was contingent on the buyer's selling their house?

This is my inlaws. They are not thrilled about accepting an offer with a 120 day contingency, but 8 months on the market and 2 reductions later- they're taking it and hoping it works out. I hope it does, too because if January comes and goes and the buyer falls through because their house doesn't sell, back to square one for my in laws.

I agree that the house is probably overpriced, but houses are harder to sell in November and December.  It isn't an appealing time to move.  Being pushed off until spring might be a blessing in disguise. 

[Bonny]

Nov 2, 2014 18:31:30 GMT -5 thyme4change said:

Nov 2, 2014 16:46:42 GMT -5 gooddecisions said:

This is my inlaws. They are not thrilled about accepting an offer with a 120 day contingency, but 8 months on the market and 2 reductions later- they're taking it and hoping it works out. I hope it does, too because if January comes and goes and the buyer falls through because their house doesn't sell, back to square one for my in laws.

I agree that the house is probably overpriced, but houses are harder to sell in November and December.  It isn't an appealing time to move.  Being pushed off until spring might be a blessing in disguise. 

If the house has been on the market for six months it means they started in May which is typically peak market time for a family type house.

It's why it's so critical to price it right when it's first put on the market. Houses get shop worn just like clothes. Agents forget about it because in their mind it's still that over-priced house. After a few months you have to keep lowering the price and wind up selling for less than what you would have had it been priced correctly from the beginning.

[Shooby]

I wad just curious because I never bought or sold on contigency but that seems to be the way most everyone else I know has done it. So which is more common? It isn't uncommon around here.

[Bonny]

Nov 2, 2014 19:36:01 GMT -5 Shooby said:

I wad just curious because I never bought or sold on contigency but that seems to be the way most everyone else I know has done it. So which is more common? It isn't uncommon around here.

Depends on the market and the type of house.

During a slower market (like the one when I bought the SF Bay Area house in 1995) and a "move-up" house it's more common.

Today in my market you're wasting your time. We have so little inventory that buyers are still competing with multiple buyers.