Buying house but using sale funds for Downpayment

[lazarru]

We've gotten a contract on our existing house and have decided on our new house that we're going to purchase. We're going to have a profit of about 150 grand from the sale of the old house and plan on putting 100 grand of that as the downpayment on the new house. Our agent is telling us we still need to put another 10 grand down up front as part of the amount we pay after 10 days. At the moment I don't have that, waiting for payment of 20 grand on a job that I did.

Question is if your using funds from existing sale for the downpayment how do you get around having to put down bit bucks 10 days after signing the contract? I'm in Jersey in that makes any difference. We asked the realtor and she was just like, well that's to make sure you don't drop out of the sale.

Thanks

 

[carone0318]

We sort of dealt with this when we decided to sell our house and had a new one built. We still had to come up with the deposits and stuff for the new house although we were using the procedes from the house we were still living in and not planning to sell until about 4 months after we decided to purchase the new home. You can take a loan out to cover the deposits and make monthly payments and when you sell your house you pay the loan off with the procedes. This is done all the time and your realtor should of been able to tell you what to do, the loan has a name to it I believe. I know that there is something called a bridge loan, but I am not sure if that is what you need. We just took a loan out with our credit union, I believe a home equity loan. If your realtor isn't much help, call your mortgage loan officer and tell them what you want to do. By the way, I am in NJ too and everything for us worked out fine.

 

[KelNottAt]

Sorry, don't have any specific advice, just some words of encouragement - I'm sure you're not the first people to be in this situation. It happens all the time. Good agents and lenders should know exactly how to make this work for you.

Good luck!

 

[EthansMom]

Have you written up the offer contract yet? In the offer contract, YOU get to write in how much money you will put down. That money shows the good faith that you will close on the house. I think we put down $5,000 on a couple of our houses. But we put more than that down on this house in CT since downpayments tend to be higher here -- can't remember how much exactly, though.

If $10,000 is your total downpayment, that's probably abou the right amount for NJ.

 

[malibuconlee]

I was just thinking the same thing. You put down the amount you would like to pay for Earnest Money on your contract. They can always ask for more when going thru price /terms negotiation. But if the Realtor is saying it's customary for $xx here, then that's probably right. The idea is to make it a hardship on the buyer if they decide to back out for reasons that have nothing to do with the condition of the house after inspection.

Sounds like you guys out East put bigger Earnest Money down than we do here. I think we put either $500 or $1,000 down for our house. Of course house prices are much lowere here too. (We paid $100,000 for our house last year).

My only other advice to you is to be careful about the chain of events leading up to the closings. I've heard of lots of problems with people trying to close on two houses on the same day, selling one, then buying another. Everyone has to have their ducks in a row come closing time.

 

[CarolA]

Wow! I put down less then $1,000 on all three houses I have purchased...

 

[salmoneous]

First of all, your agent should be busting her tail being creative and finding ways to make the sale happen. That's her job! Sheesh. But at this point, that's water under the bridge.

What you need now is your lawyer. You are talking contracts, money, etc. This is where they earn their pay - if nothing else, keeping you out of trouble. Most RE lawyers, including the ones I dealt with in NJ, charged a flat price for the sale, so it doesn't cost anything extra to get them involved from the start. And most will want to be involved from the start - with *their* offer sheet, not the generic one drawn up by the agents.

 

[tar heel]

Are you building? Many builders have very specific requirements. We had to put down $2,000 at the beginning and 5% of the cost when construction started. We had to sell stock to get it.

If you are already working with a mortgage lender, ask them. They will likely be willing to give you that with your old house as collateral -- essentially a home equity loan.

 

[summerrluvv]

Our clients always still have to put the money down even if they are using proceeds from the sale for the purchase. If you were to back out of the deal, then the seller has no recourse really if there is no down payment to keep. KWIM?

 

[jenny2]

I remember a co-worker selling his current home and buying a new one. He took out a "bridge loan" to cover the cost of the down payment of the new house, and then the bridge loan gets paid back when he got the funds from the house he was selling.

 

[Stacy's a freak]

I'm a real estate paralegal in NY and we do this all of the time. Yes, you should be able to get a "bridge loan" from your bank/Lender/mortgage company. For most banks/lenders, you need to provide proof that you have contracted to sell your house in order to qualify for a bridge note. Just be aware that bridge notes often have a higher interest rate (the bank I deal with regularly charges 9% interest or this type of loan given the possible risk that your Lender is taking on if your sale does not happen).

Yes, as a previous poster mentioned, it can sometimes get hairy when you try to sell and buy on the same day. Not only can this be a logistical nightmare to get the paperwork done in the same time frame, but to coordinate the calendars of EVERYONE. Just make sure your realtor (or attorney's office if you use them in NJ) is aware of this. If your Lender is workable, you might also want to set up a bridge note when it comes to buying/selling for the $150k. That way, if your purchase is scheduled for a day or two BEFORE your sale, you aren't stuck without your downpayment.

If you have any more questions, feel free to ask or PM me. Hang in there! It's stressful, for sure, but it's completely workable.

 

[Cindy's Mom]

Yes, as a previous poster mentioned, it can sometimes get hairy when you try to sell and buy on the same day. Not only can this be a logistical nightmare to get the paperwork done in the same time frame, but to coordinate the calendars of EVERYONE. Just make sure your realtor (or attorney's office if you use them in NJ) is aware of this. If your Lender is workable, you might also want to set up a bridge note when it comes to buying/selling for the $150k. That way, if your purchase is scheduled for a day or two BEFORE your sale, you aren't stuck without your downpayment.

If you have any more questions, feel free to ask or PM me. Hang in there! It's stressful, for sure, but it's completely workable.

Stacy's while there certainly are some cases that would present a logistical nightmare to sell and buy on the same day, I respectfully disagree with you. - I used to be a closer at a title company and about 99% were sell and buy on the same day. Everyone gets paid contigent upon these two transactions taking place, so you can best believe that they will do their darnest to make it all happen. This includes real estate agents, lenders and attorney's. I've found that closings that go down to wire were actually shaky transactions to begin with; and I don't mean a bad buyers exclusively, these too could include risky lenders or even risky attorneys.

 

[Stacy's a freak]

Stacy's while there certainly are some cases that would present a logistical nightmare to sell and buy on the same day, I respectfully disagree with you. - I used to be a closer at a title company and about 99% were sell and buy on the same day. Everyone gets paid contigent upon these two transactions taking place, so you can best believe that they will do their darnest to make it all happen. This includes real estate agents, lenders and attorney's. I've found that closings that go down to wire were actually shaky transactions to begin with; and I don't mean a bad buyers exclusively, these too could include risky lenders or even risky attorneys.

I know that things are quite different from state to state and given the fact that NY state is not an "escrow state", we go through hell sometimes to get things together. I have heard that "escrow states" are able to close things in only a couple of week's time. That is not so in this area of NY. We need abstractors to get the abstract (a/k/a title work) done, we need surveyors to get their work done and a map drawn, we need the seller's attorney to review the documents, then forward to the buyer's attorney, and then sometimes to a bank attorney (if the bank and buyer are represented by different parties). Consider this process times 2 when you are handling both a sale and a purchase. So, again, it really depends on how things are done in your specific state (and area too as NY state differs from area to area).

My post was not meant to scare anyone - I just have the inside track on MY area and wanted to alert the OP to some possible situations and things to look out for.

 

[malibuconlee]

I thought Iowas was the only state that still did abstracts? No title companies here. Have friends that just moved here from Texas and one of their parents were extremely worried about the fact that they weren't doing their closing at the title company.

Supposedly Iowa has some of the cleanest titles in the country tho.

It's really interesting to read through an abstract and see who owned the house and how much they paid for it a hundred years ago. The liens place on it in the past, who owned the land before the house was built.

 

[Stacy's a freak]

I thought Iowas was the only state that still did abstracts? No title companies here. Have friends that just moved here from Texas and one of their parents were extremely worried about the fact that they weren't doing their closing at the title company.

Supposedly Iowa has some of the cleanest titles in the country tho.

It's really interesting to read through an abstract and see who owned the house and how much they paid for it a hundred years ago. The liens place on it in the past, who owned the land before the house was built.

Wow - and I thought NY was the last one with abstracts I agree about the clean title thing. It's nice that you don't have to buy owner's (fee) title insurance here. It saves a little money there.

 

[summerrluvv]

Wow - and I thought NY was the last one with abstracts I agree about the clean title thing. It's nice that you don't have to buy owner's (fee) title insurance here. It saves a little money there.

What part of NY do you live in? I'm on Long Island and they don't use abstracts here and the purchaser has to buy title insurance.

 

[Stacy's a freak]

What part of NY do you live in? I'm on Long Island and they don't use abstracts here and the purchaser has to buy title insurance.

I live near Ithaca (Central NY). I know that they do title searches in parts of the state that are more eastern (like Poughkeepsie and south, at least). But here, and areas to the west are different.

And often times, the purchaser has to buy mortgagee title insurance here too. But there are 2 kinds of title insurance. In escrow states (and in your area presumably), the purchaser has to buy BOTH mortgagee and fee title insurance. But here, the purchaser only has to buy mortgagee title insurance if the Lender requires it. For the most part, this allows the lender to sell a fixed rate note on the open market. The owner has the option to buy fee title insurance (fee, is another word for "owner's"), but we don't suggest it unless there is a title problem. So 99.9% of purchasers don't buy fee title insurance.

 

[tlbwriter]

Our clients always still have to put the money down even if they are using proceeds from the sale for the purchase. If you were to back out of the deal, then the seller has no recourse really if there is no down payment to keep. KWIM?

In my part of the country, the money you're talking about is called earnest money. It's paid when you make an offer, and it's completely separate from the down payment. The earnest money is between the buyer and seller, and the down payment is between the buyer and lender. I don't think I want to buy anywhere where the seller has a say in my down payment!

 

[molly2004]

I know that you can get a "bridge loan" for this. Most people don't have that much money for a down payment until they sell their current house. Your mortgage broker should be able to help you secure one of these.