Creative Upsizing Part 1

Karl Miller
Published on January 9, 2020

Creative Upsizing Part 1

Creative
Upsizing, Part 1

Is your current home starting to strain a little at the seams? Are you constantly knocking elbows with your kids or spouse? Are you starting to dream of a little more wide open space? We get it. There’s a distinct market trend to upsize these days; whether because your adult children, or your parents, are moving back in, or because you just really want that extra home office space. The housing market in the U.S. today offers purchasers a unique opportunity to upsize while locking in a low-interest rate. But what about your current house? Can you sell and buy simultaneously and still come out on top? We’re delving into a two-part series to discuss some smart financing options that will ensure that you do!

Use a“Subject to Sale” clause:

Pros:

Traditionally, when people move, they
find their dream house and then make an offer to the seller that is subject to
their current home selling. They put their current house on the market and wait
for it to close before closing on the new house.  The advantage of going this route is that
buyers receive the cash proceeds from their house needed to cover the down
payment before closing on the new purchase. It is a “safe” way to go for a
buyer, since funds are in hand, and there is no uncertainty in housing for
their family.

Cons:

This method can be weak for purchasers and without a defined closing date, both buyer and seller must agree to live with ambiguity.  The buyer doesn’t know exactly how much they will net on their sale, and there is a chance the deal may not close. To offset this uncertainty, most sellers will want the option of continuing to solicit other offers. If a better one is received and accepted, they’ll jump on it, tossing the original offer. Buyers may negotiate by offering the seller a large deposit in exchange for “holding” the property for them, or by offering to make monthly payments to the seller. Also, closing dates for sale and purchase are typically on the same day. Between moving trucks, key exchanges, and final walk-throughs; addressing all the last minute issues can make for a stressful day for all parties.

Although common, subject-to-sale clauses are not offers in which a buyer has much leverage– especially in the current seller’s market. Sellers typically hold all the negotiating power in these situations.

In our next post, we’ll discuss a type of
loan called a Bridge Loan, and the option to “sell first and buy later–. Both
sound options for specific buyers. As you read through this series, feel free
to reach out with any questions, or to discuss which option might be best for
your family. We want to provide all our clients with fully customized service,
tailored to your specific needs.

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