Thursday, January 18, 2007

Secrets to simultaneous real estate closings

Selling one house and buying another is like putting yourself between a rock and a hard place.
If you set both closings within the same basic time frame you run the risk of ending up with two mortgages or much worse.

If you schedule them with sufficient time between to solve any closing problems you face the prospect of renting and moving twice.

This is not a rare occurrence -- the National Association of Realtors, or NAR, estimates 6.24 million homes were bought or sold during 2006, and unless you were a first-time buyer or kept your old house as an investment property, most of those transactions involved buying one house and selling another.

But there are steps you can take to protect your best interests.

A dual real estate transaction means you have two choices: a simultaneous closing or a staggered closing. With a simultaneous closing, you set these two transactions as close together as possible, often on the same day -- usually selling first and buying second. With a staggered closing, you build in some time between the two transactions -- days, weeks, months or even more.

First, the bad newsWith a staggered closing, you incur the cost of renting in the interim. You may have to find a place to store some of your belongings and deal with the hassle and added expense of moving twice. You're losing the equity you could be building in a new home. And there's the ever present danger you'll fritter away the profits you've banked from the last sale before you can get into your next home.

A simultaneous closing also has disadvantages. If something goes wrong in the first transaction, you could find yourself in big trouble.

If the first closing fails and you don't walk away with a big fat check, you may not be able to close on the house you're buying. Which could mean you're defaulting on that contract and could lose your earnest money deposit -- often as much as 10 percent or 20 percent of the purchase price.
If this happens at the last minute you, of course, have nowhere to live and have to immediately arrange to have all your possessions put in storage. Obviously this situation could lead to many other expenses and inconveniences. If you're more fortunate, you could quickly arrange for an extra loan to enable you to close on the home you're buying and to cover the period in which you own two homes -- so-called "bridge" financing. At best, you would only have the burden of making two mortgage payments every month.
For more information, click here.

San Fernando Valley Real Estate

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