Secrets to simultaneous real estate closings
|By Dana Dratch
Selling one house and buying another is like putting yourself between a rock and a hard place.
If you set both closings within the same basic time
frame you run the risk of ending up with two mortgages or much worse.
you schedule them with sufficient time between to solve any closing problems you
face the prospect of renting and moving twice.
This is not a rare occurrence -- the National Association
of Realtors, or NAR, estimates 6.24 million homes were bought or
sold during 2006, and unless you were a first-time buyer or kept
your old house as an investment property, most of those transactions
involved buying one house and selling another.
But there are
steps you can take to protect your best interests.
|The timing of your closings can be as critical as
the cost of your new home or the interest rate on your mortgage. And each has
advantages and disadvantages.|
|5 tips for successful closings|
A dual real estate transaction means you have two
choices: a simultaneous closing or a staggered closing. With a simultaneous
closing, you set these two transactions as close together as possible,
often on the same day -- usually selling first and buying second.
With a staggered closing, you build in some time between the two
transactions -- days, weeks, months or even more.
First, the bad news
With a staggered closing, you incur the cost of renting
in the interim. You may have to find a place to store some of your belongings
and deal with the hassle and added expense of moving twice. You're losing the
equity you could be building in a new home. And there's the ever present danger
you'll fritter away the profits you've banked from the last sale before you can
get into your next home.
A simultaneous closing also has disadvantages. If
something goes wrong in the first transaction, you could find yourself
in big trouble.
If the first closing fails and you don't walk away
with a big fat check, you may not be able to close on the house
you're buying. Which could mean you're defaulting on that contract
and could lose your earnest money deposit -- often as much as 10
percent or 20 percent of the purchase price.
If this happens at the last minute you, of course,
have nowhere to live and have to immediately arrange to have all
your possessions put in storage. Obviously this situation could
lead to many other expenses and inconveniences. If you're more fortunate,
you could quickly arrange for an extra loan to enable you to close
on the home you're buying and to cover the period in which you own
two homes -- so-called "bridge" financing. At best, you
would only have the burden of making two mortgage payments every