Buying a new house (before selling the old)

[JeanneElle]

Ooh, that's risky. A friend of mine did that and now they're, uh, hooped. They can't find renters, can't afford both houses, and can't find a buyer for one of the houses (and we're in Canada).

Good luck to you - I hope it all works out :-)

[maat55]

In most states it is called a Hubbard Clause in the Purchase & Sales agreement. If you find a house and your house hasn't sold yet then you attach a Hubbard Clause to your P&S. This means that the house that you want to buy is still on the market and if someone else wants to buy it then you have a certain time period to remove the Hubbard and purchase it based on your P&S. The time frame is typically 24-48 hours.

Most people don't have the luxury of closing and then having weeks to do stuff on the house. Most of move in the same day as closing especially if you are selling another home because you have to be completely out of the house on the day of closing.

I've done this on two occations, in both cases we closed on fridays so that we could all move on the weekend. I also, start moving small things to a storage before closing, to ease the process.

[jamiefic]

I've seen some people have a really hard financial time because of owning two homes, thinking that they could sell the first one (or even then trying to sell the second just to be out of one). And it seems like sometimes people think it will work, but something changes along the way...anyway, definitely think it through. Would it really be bad to wait a bit before buying?

[all4money]

Reading all these responses really hits home with me... We have our home on the market right now and in the meantime have started looking for our new home. We've looked at literally 50 or more houses and just found the "perfect" house for us two days ago. The house itself needs a lot of work (picture carpeted floors in the bathrooms), but the lot/land/location is to die for! It's everything that we want... Only problem is that we have to sell ours first. I sure don't want to have two mortgages but I really don't want to lose out on this property either. Geez.

Anyway, good luck with your decision. I know it's tough to do the "right" thing sometimes.

[TBH]

I'm reviving this old thread because I'm still thinking about this. I know what you're all going to say, but I'm seriously thinking of doing the following.

a.) refinance current house to pull out money for a down payment
b.) buy new house
c.) rent out old house
d.) sell old house in a couple years when the market recovers

Do you think I'm insane?

A few numbers:
We owe $45,000 on our current house. I'm not sure how much the market has dipped but I think it's worth about $120K, maybe a bit more. We'd probably refi it for $100,000, giving us $55,000 to use as a down payment.

I think our payments on the old house for a $100K mortgage would be about $800/mo (PITI), and I'm pretty sure I could rent it for $900-1000/mo. Not a huge cushion if it needs repairs, but hopefully it would be enough.

We would buy a house costing about $250,000, with payments of about $1500 per month (PITI).

Income varies a bit (I freelance) but is around $75-80K per year. If we use the lower number of $75K, our monthly income is $6250. If we use the rule of spending no more than 33% of your income on housing, that's $2062 per month. We should be able to afford the $1500 payments on the new house.

The goal is to leave our current cash reserves intact. We'll definitely need them to move, get this house ready to rent, carry both mortgages while we find a renter, and have a decent E-fund left when the dust settles.

Current cash reserves are around $30,000, not including the money I've set aside from my freelance income to pay my 2008 taxes.

We're currently saving about 15% for retirement. Have one child who is about to finish preschool and go to public school, freeing up about $250 per month in preschool tuition. We have no debt except the mortgage on our house.

Reactions? Am I crazy to even consider this? I know this is a want, not a need, but I WANT a house that would allow me to have a home office, now that I'm working at home. Working at the dining room table is driving me batty. I also WANT a back yard (current house has none) so I could grow more of our food. I am afraid if I don't do this now, when it's such a buyer's market, I won't be able to afford it for another 5-10 years. That $250K house I want would probably have cost $350K a year ago.

[hmd2009]

I wouldn't do it, but only because we did it, put the other house for sale and bought the new one, and then had a freak flood that was declared a federal emergency. Funny thing is, FEMA won't help you if its not your primary house. So now we're stuck with a completely ruined house that we can't sell (that has a mortgage on it) and our new house . . *sigh*

[LivingAlmostLarge]

hmd2009 WOW! What a story, sorry to hear but I HAD no idea about stuff like that. Was it insured though?

[snafu]

Unless you specifically have an expensive 'Flood Ins.' rider in your homeowner's insurance policy, flooding is not covered.

[hmd2009]

hmd2009 WOW! What a story, sorry to hear but I HAD no idea about stuff like that. Was it insured though?

Like Snafu said, if you don't have flood insurance, you are not covered. I was 22 when I bought the house and had no idea floods weren't covered (the policies are issued by the government). Anyway, no one else in town had flood insurance, but luckily it was their primary residence so they received emergency relief from FEMA, and FEMA eventually bought out ALL the houses that flooded EXCEPT for ours, to demolish them in an effort to keep folks out of the newly designated flood plain. Anyone have any idea what to do in a situation like that? Wasn't like it was a vacation home. It was a house that wouldn't sell because the housing market sucks. *sigh*

[responduser]

Yes I would tend to agree. It might not be a good idea to buy befoe selling. Have you considered renting a place till the time you have completed the sales?