REPEAT BUYER: SELL FIRST OR BUY FIRST? That is the Question!

By
Real Estate Agent with Mason Real Estate CA BRE 01444168

The year 2010 is going to be an excellent year for the repeat buyer to move up in this down market.  The Hemet - San Jacinto real estate marketplace is a field of dreams for repeat buyers with equity in their existing homes.  I have been covering various aspects of this concept in a number of articles I've recently written.

In this article, I want to answer the question many Hemet - San Jacinto homeowners contemplate and need to know how to proceed.  The question, of course, "Should I sell my current home before I buy?" and then, "What Happens if I can't find the right home - I don't want to feel pressured?"

The problem that most repeat buyers have is they will not qualify for a mortgage on their new home until the old home is sold.  Anyone considering selling and taking advantage of the market should definitely spend some time with a competent loan office, such as Hillary Wilkinson of Patrion Mortgage (Altura Credit Union) to find out all of the nuances of the home loan world at any given time - because it does continue to change rapidly.

STRUCTURE A CONTINGENT OFFER

It is no secret that sellers would prefer an offer that is non-contingent on anything, especially the sale of another home.  After all, if the buyers' home doesn't sell during the contract period then the seller is still looking for another buyer.

In order to accomplish the goals of the buyer it will probably mean offering a minimum of full price to the seller . . . possibly even a premium above list price.

The longer a listing has been listed in the MLS and on the market, the more receptive a seller will be to consider accepting a contingent offer for the sale of their Hemet - San Jacinto, CA home for sale.

The seller will be looking for protection in the event the buyers' home does not sell and will want a ‘release clause' in the contract that enables the seller to continue marketing the home and accept a back-up offer.  Once a back-up offer is accepted, the first buyer will have to remove the contingency or lose their position if they cannot provide verification that they can close the escrow without the need for selling their primary residence.  In the event that the buyer cannot remove the contingency or verify that they have the means to close on the new home, then the contract is cancelled and the seller moves on to the next buyer.

No doubt this can be very frustrating for the first buyer - especially if they have been working hard at getting their home ready for sale and they get bumped because they do not have the necessary resources to qualify for the loan for the new home they have their hearts set on.

THERE IS STILL HOPE

Perhaps the best advice I can offer as a local Hemet - San Jacinto real estate agent / REALTOR® to avoid this scenario is to first list your current home and price it to sell before you make an offer contingent on it's sale for your new replacement home.

I believe the best position to negotiate a contingent offer is not just on the sale of your home but on the close of the escrow of your home  You see, a seller will be much more receptive to working with a buyer whose home is already in escrow with a solid offer than a listing that may never get any offers.

Once you find your new replacement home and you are negotiating with the seller, you will want to keep all release clauses out of the contract - at least nullify them once all of the contingencies have been removed from the buyers sale of their home.

AVOID THE DOUBLE MOVE

Regarding the sale of the buyers' home it would be wise to negotiate a ‘rent back' clause that would allow the seller (repeat buyer of new home) to rent back the home for a limited time to allow the seller to find a new home and close escrow on it, in order to avoid the double move.

The buyer would also be well advised to negotiate a provision to the release clause that it will not be invoked for a set number of days.  30 to 45 days should be sufficient to find the suitable buyer and have the buyers' contingencies removed so the repeat-buyer will be able to remove their own contingencies.  In a perfect world, the seller should not be able to invoke the release clause once the repeat buyer has a buyer for their home.

The repeat buyer can offer the seller additional protection by granting the buyer (through their real estate agent) to have access to the buyers escrow for the sale of their home and instructions to the escrow officer to keep the contingent seller informed as to the progress of the repeat buyers escrow for their home.  In the event the escrow does not close, for any reason, the escrow officer would notify the repeat seller and give the repeat seller the discretion to cancel the contract.

MONEY TALKS

Money is always a strong factor in every negotiation.  Perhaps the repeat buyer may consider offering a non-refundable earnest money deposit as an aspect of the offer to purchase.  In exchange for the non-refundable cash, the seller would agree to keep the home off the market for a specific period - perhaps 60 to 90 days, depending on market conditions, how long the sellers home has been on the market and the amount of the non-refundable cash.  It may be wise to include a small percentage as a fee to the Listing Agent to help motivate them as to the merits of the offer and to keep the deal alive if it get close to the gray areas.

Finally, the repeat buyer needs to be transparent with the sale of their home.  Allow the listing agent and the seller to examine your home and verify its condition and that the home is priced to sell.  Don't be surprised if they want you to lower your price, if it is not already under contract.  Remember, they have a vested interest in the sale of your home and then need to feel secure, as they have plans, too.

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Until Next Time, Have a Blessed Day,

John Occhi, ePRO, REALTOR®
DRE Lic No: 01444168


ePro,John Occhi,www.johnocchi.com,realtor      Certified Probate Real Estate Specialist Logo Awarded to John OcchiFive Star Logo,Certification,REO,Five Star Institute     

Excellence in Real Estate,Team Log,John Occhi,www.johnocchi.com,hemet,san jacinto,CA  

This blog and the contents written here is the intellectual property of John Occhi, Temecula - Murrieta, CA REALTOR® in the South West Riverside County region of the Inland Empire of Southern California.  The views and opinions expressed are just that - views and opinions of John Occhi and those who comment.  Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance. 


I am proud to be a full time REALTOR® who is proud to be a contributing member of the ActiveRain community.

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Rainmaker
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Bob Force (REALTOR®)
Century 21 New Millennium - Mount Airy, MD
The FORCE in Maryland Real Estate

John:

I believe you have the bases covered.

This is a concern I have had discussions with several repeat buyers with recently.

Have a safe and happy holiday searson.

Dec 25, 2009 02:36 PM #1
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Rainmaker
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John Occhi

SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
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