By Barbara Lehrer
Real Talk
Barbara Lehrer
One thing that has not changed in the purchasing of a property in the last three years is how important it is that you set up your financing ahead of time. All potential buyers should set up how they will finance their next move before they shop.
This crucial step is for everyone; it does not exclude those who own a home. In fact, each homeowner currently has debt and that debt does not go away until they sell.
Why is this information so important? The buyer pool is huge, and the competition ranges from low money down offers to cash offers. All sellers love cash offers because they only have to wait days for the home inspection, and then their deal is free and clear pending the title search, giving them more time to search and buy.
If you want to, for example, downsize, then find out if you have enough equity in order to purchase without the contingency of a Hubbard clause. This clause states that when you close on your current home you will immediately have the resources – the cash – to close on the new home.
It’s a tough market, so you really want to make a plan and speak to your financial advisor about your accounts. There are multiple ways to get money – even life insurance policies. A lender will look at your bills, credit cards, car payments and all your monthly commitments. Your advisor will look for money that can be used to purchase if you are downsizing. Then in a few months you can replenish those accounts when you close on the home you are in. In other words, avoiding a mortgage can help you get the new deal when you have a lot of competition.
Another reason to not have a loan is that the closing costs add $10,000 or more to your purchase price on the new home.
Set up the finances in their entirety. This cannot be done quickly, and when you find the home you want to buy you have to be ready. It doesn’t cost to be ready. All your realtor needs from you when you actually write an offer is verification of funds. In that moment it is not a good idea to be panicked about how it is going to work.
If you are not ready and confident, then the listing side will know and move on to another potential offer. The purchase and sales agreement specifically asks how you are financing, and the proof has to be attached.
Sometimes homeowners are disappointed when they find that they do not have everything they need. Sometimes the temporary funds can be a bridge loan. In this manner a mortgage company gives you a short-term loan based on the closing of your home. Even the bank knows that in today’s market you do not have to worry about selling your home. The buyers are waiting in line. Anyone changing properties is anxious to make sure they have a nice place to go, so many do not want to list unless they find that perfect downsize.
This strategy of pulling together assets temporarily will let you find the home you like first, and then you can jump into the market to list. If you have owned your home for a long time and created other savings options, this might be just what you were looking for.
If you need more information on these issues, email Barbara.Lehrer@cbmoves.com.