Secrets to simultaneous real estate closings
Kristina Grebener has seen the problem from the inside.
When she and her family planned to buy a bigger house in their same
Madison, Wis., neighborhood, they didn't anticipate any problems.
The market was hot and properties were moving. They found the house
they wanted, made an offer and set the closing date for late July,
thinking they'd have sold their old house by the end of June.
But in the interim, there was "a cooling in the market," Grebener says. A lot of nearby homes went up for sale, and "the buyers weren't there to support that," she says.
The family closed on the purchase in July as planned, using a home equity loan on their old house to make the down payment on their new home. But they have yet to sell their first home or move. Counting the new mortgage payment, the home equity loan and double utilities, keeping the old house is costing the Grebeners an extra $2,600 each month.
"Every month I make a mortgage payment is lost money," she says. And while the family can afford it for now, it's putting a dent in their budget -- especially with kids just a few years away from college, she says.
"It's like a game of musical chairs," Steven
Rick, a senior economist at the Credit Union National Association,
says about coordinating closings. "It's a function of the housing
market. Now that it's unraveling, you definitely do not want to
be buying a home without selling yours."
Ron Phipps, a broker with Phipps Realty in Warwick,
"Very few people have the ability to own two
properties with ease," he says. "For some people, the
closing date is as pivotal as the money." So the goal is often
to schedule the home sale first, then set the home purchase within
the next 24 hours -- often for later that same day. "Doing
simultaneous closings is really the goal."
But finding a buyer to close on your home at the exact minute you find a home to buy yourself isn't always easy. More often than not, you've found one without the other -- and that can make setting the closing date a tricky proposition.
"For real estate practitioners, this is always
the hardest part of the transaction," says Phipps. "Typically,
you have to have the house you're selling cleared out at closing."
But just as often, "you need money from the first house to
close on the second house."
Just like staggered closings, simultaneous closings should be carefully planned. "It needs to be done with good advice and the best precautions," says Dave Dalzell, a regional vice president of the NAR and the owner/broker of Abilene, Texas-based Dalzell Realtors.