What should we do if we have to close on a new home before our old one sells?
My Realtor suggested that we take the contingency clause off the bid we made on a new home so that we could proceed with the purchase. She made it clear that our home would be sold by the closing date. Now it is close to the closing date, and our current home is not sold. There is no way we can afford $410,000 in mortgages. The sellers already said if we try to get out of the contract, they will contact a lawyer and seek legal action. I am almost willing for them to do that than for me to pay $3,200 a month in mortgages until our current house sells. What are my options?
A. This is a dangerous time to be buying a new home before you've sold your old one. That's why we urge readers not to do that unless it's an absolute necessity (they've been relocated to another town, for example) and are prepared to pay two mortgages for at least 12 to 18 months.
Here are a couple of options:
Proceed with the purchase if you have enough savings to make both mortgage payments for the foreseeable future. That could include borrowing from your 401(k) retirement plan, for example. We usually don't encourage that, but you're in a bind and can repay yourself when your old home sells.
Another possibility is to take your contract to an experienced real estate attorney and ask if there's a way to slip out of the deal. Most contracts have clauses that allow buyers to bail if they can't get financing or don't like the results of a home inspection. (Don't pick a lawyer recommended by your real estate agent or who frequently works with your real estate agent.)
If that's not a possibility, you could still refuse to proceed. You'd almost certainly forfeit any deposit you've made and the sellers could threaten to sue. Your attorney should have a good grasp of what's happening in your local real estate market and help evaluate the legal and financial risk. A lawyer will know, for example, what he or she would tell the sellers if they asked whether they should sue you.
Once the dust settles and you've either completed or abandoned the purchase of your new home, find another real estate agent. You deserve better advice than you got from her.
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