Buying and selling: Avoid the potential nightmare
Category Finance
Buying a new home is always an adventure - but what if you're still trying to bring a previous adventure to a close? Facilitating the transition of homeownership comes with an array of concerns that are unavoidable when the purchase of a new home and the sale of an old one occurs simultaneously.
The two primary concerns for buyers who are sellers at the same time are finances and logistics. If the transition is to be facilitated successfully, these two concerns must be taken into consideration from the start.
Financing Your Future
Finding funding for a real estate purchase is not a simple process, and it is even more complicated when you are already attached to a home loan or mortgage plan. When this is the case, your options vary:
Equity from the sale of your Current Home
When your current home still needs to sell in order for you to use the funds to purchase your new home, a suspensive condition should be added to your Offer to Purchase clearly stating that your purchase relies on the successful sale of your existing property. In most instances such a clause will have a deadline by when your home needs to sell, and more often than not the seller is allowed to continue marketing the property until such time that your sale is secured. Should the seller get another offer while your home has not yet sold, you will be provided with a couple of days to either come up with the money or walk away from the sale.
Securing Bridging Finance
Another option is to obtain bridging finance, where you take out a new loan that enables you to cover the essential costs of the new property purchase while you await the sale of your current property. This is an expensive option, as it comes with additional administrative costs and conditions. It will, however, enable you to purchase your dream home without the threat of it going back onto the market.
Securing a Second Home Loan
If you have the affordability, you may be able to successfully apply for a home loan on the new property, without having to cancel your existing home loan. This gives you time to sell your home, without having to make your new purchase subject to the sale of your existing home. This is however dependent on affordability and a clean credit record. To find out for how much you qualify, it is recommended that you use the services of an experienced bond originator like www.mymortgage.co.za.
Cash Purchase
If you have the cash, you can use it! The most common scenario in which a cash purchase becomes possible is where a homeowner uses the funds from a successful property sale to fund the purchase of another property when no existing home loans still needed to be settled or were close to being paid off.
Considering the Logistics
With all four of these financing options another conundrum enters the picture: Where are you going to stay if the sale and purchase times do not overlap? When one home is being traded for another, the possibility always exists that one contract will have ended before the next has begun.
Occupational Rent
The first option is to pay occupational rent in order to continue living in your old property after it has been sold, or to take possession of the new property before it has registered in your name. This is however an option that needs to be negotiated between all parties involved, as it will also have an impact on the buyer of your home, or the seller of the home you are buying, depending on the situation. This option does, however, allow you to move directly from your old home into your new home in one go, saving on transport and storage costs.
Short-term Rent
Finding a short-term rental is the next best way to go. It may be more expensive, but you will most likely be allowed to stay on as long as you need, as long as you pay your rent. The only downside is that you may need to rent storage space for your possessions as well, depending on the size of the short-term pitstop.
Bumming on the Couch
This is the cheapest of all the options. Family and friends who live close by will undoubtedly be willing to offer you and your family the spare room, the couch, or at least a tent in the backyard if there are no other options left to you. Unfortunately, this option also requires the renting of storage space, or family and friends who are willing to have you park your furniture-filled trailer in the driveway.
To ensure that your move from one adventure to another is not a financial and logistical nightmare, it is vital that you obtain the necessary guidance to get things done right the first time.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Author: Meridian Realty
