TWO HOUSES & TWO NOTES © 2012 by Wayne D. Lewis, Sr.

Please see my other posts at: www.richfitusa.com

 

Unless you are an investor, having 2 house and 2 notes is nothing short of scary.  Many homeowners find themselves trying to avoid this dilemma when trying to buy one house and selling another.  The time frame has to be just right, or, 2 notes will be the challenge that they will have to falter through.  How does it happen, and can it be avoided?  Let’s discuss.

How does it happen?

Many homeowners, for whatever reason, have to move during their lifetime.  Gone are the days of staying in one house for over 50 years.  While it still happens, it is happening more rarely.  What we find is that homeowners are staying in their homes under 10 years on average.  There is either a job transfer, a family is growing, or a family is shrinking.  And sometimes, there is a change in the neighborhood, it becomes overgrown with crime, or the dynamics that brought a homeowner to a neighborhood has changed, where the neighborhood just isn’t quite the same.  In any event, the decision to move becomes inevitable.

Current homeowners know that it is a balancing act between selling their current home and buying a new one.  They absolutely don’t want to have to pay 2 notes on 2 houses. The question is: Which one do you do first?  Perhaps other experts will differ with me, but I don’t think there is a magic solution.  Why?  Because there are so many factors at play.  Obviously, there is the need to prepare the house that is currently being occupied while looking for the next house becomes an outright challenge if for no other reason, the rest of your life continues on as well.  And don’t let there be a situation of trying to avoid a 2 notes and 2 houses when one house is 100’s of miles away from the other. 

How can we avoid 2 houses & 2 notes?

A.  One consideration that Mr./Ms. Homeowner may take into account is selling their first home, putting everything in storage, renting a home until they find another home.  Then, they would buy their next home, possibly breaking a lease, or paying out the least in advance, and then getting their things out of storage.  But that may cost more in the process that it’s worth.

B.   Another consideration that some homeowners may take into account, albeit begrudgingly, is to rent the current house for a year while still having it on the market.  That way, an income is being produced while the owners become acquainted with their second home.  This works best if you have a property manager.  Or, you can choose to travel back and forth to address issues associated with renting your home.  Additionally, if your home is on the market, your Realtor® will play an important role as well in showing your first home to perspective home buyers.

While renting the current home may help with the first note, it should also address any potential repairs.  So make sure that the rent exceeds the current not by at least 10% a month.  You may also want to check with your neighborhood association regarding renting your home in certain subdivisions, as this may violate some covenants. Some Homeowners Associations sometimes impose violation fees.  Renting is an option for some, but not everyone. 

C.  Many homeowners want to play their cards right down the middle.  They want to chance putting their home on the market and finding the perfect home and hoping that one transaction can be coordinated well enough to offset the other.  Have I overused the word “rarity” or any form thereof? 

The homeowner who is interested in selling and buying, almost simultaneously is virtually orchestrating/pleading, and in some cases, demanding that everyone is doing their part to make this happen.  That is a big demand, and given the interaction of humans in general, good luck with that.  But it can happen, and here are a few tips to try to get this to work:

1. When the homeowners have decided to sell their first home, put it on the market immediately.  Get the Realtor® on board, and let him/her know what your plans are.
2. If the homeowner is going to move out of town, say over 50-100 miles, or across country, find out from your Realtor® if their broker works with a network of Re-lo companies.  If so, this will facilitate the process of locating the next home.  If the move is across town, or under 50 or so miles, your Realtor® can network with a local company if their company does not have branches in the area that you are moving close to.
3. Mr/Ms Homeowner have now put their house on the market, to sell.  That means, at the best possible price that homes are selling for in their immediate area, not 10 or 15% above the market.  AT MARKET VALUE.  By doing this, the house will get more showings, and possibly, an offer or offers will be made that the sellers can begin working.
4. Mr/Ms Homeowner are now positioning themselves to find their next dream home.  That means, working with their Realtor® (whether local or RE-LO), to fine tune their search for their next home.  It is important to let your Realtor® what it is you want exactly in your next home.  Most Realtors® know their inventory.  Almost to the exact amenity, many Realtors can practically take you to the house that you have described.
5. When you locate the house that you want, move on it.  Don’t hesitate.  Stop searching!  You have found your house, write your offer.  But write it, subject to the sale of your current home.  And then, wait.
1. There is a delicate balance in writing this type of offer.  In Louisiana, it is referred to as a Predicated offer, or a Contingency.  In this case, you are asking another seller to take their home off of the market until you sell your first home.  This predication or contingency may require a higher deposit.  Something to assure the owner of the home you intend to purchase that you are serious, and that, should you back out, the 2^nd owner has something to address their concers.
2. What may also need to be in place for a contingency is the fact that there is an accepted offer on Mr/Ms Homeowner’s first property.  If there is an accepted offer, that means that a closing date can be referenced in the contingency or predication.  This helps to put the 2^nd homeowner at ease, but not necessarily without the higher deposit.
6. An accepted offer on Mr/Ms Homeowner’s house, all things be equal, will need to be moved along very carefully, honoring all deadlines and submission requests.  The important thing that will need to happen, is to practically set up the closing on the first house so that it doesn’t differ by more than 1 or 2 days of the second house’s closing. 
7. Selecting a title company on the sale of the second house that understands what you are trying to accomplish will also be key.  In many cases, in Louisiana, the buyer selects the title company, but through a means of communicating with the buyer of the first house, and the title company, along with communicating with the 2^nd title company, it will be like sheer magic, the ability to close one house, and then other within basically days, if not hours.

 What we have just discussed here is how homeowners can work to avoid having to pay 2 notes on 2 homes, especially if the homeowner is looking to buy another home while living in the first one.  We discussed selling the 1^st home, putting personal items in storage, and then renting another home until finding a desired home that we ultimately decide to buy. We also discussed renting out the current home for a year until the seller settles into their new home.  Finally, we discussed that if the seller works with the team involved in the buying and selling process, including their Realtor(s)®, the homeowners of the 2^nd home, the title companies and the buyers and sellers on both sides of the process, it is very possible that Mr./Ms Homeowner can avoid paying 2 notes on 2 houses.  Don’t forget, Make Your Best Offer.

 

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