How risky is this - closing on new house before closing on current house

[TKH]

We had 25 days in an extended-stay hotel with 2 adults and 3 kids. The movers let us keep our stuff in the van untouched for that time, and charged us $250 to 'rent' the trailer. The hotel was $2,000 though. Worth it at the time just to have the house sold.

 

[kidshop]

1) OK, I will admit to a sneaky little ploy.
2) We have moved seven times due to job promotions and job changes.
3) Twice, we thought the seller was unreasonable during negotiations.
4) The seller would not budge enough.
5) So, AT THE CLOSING TABLE for we asked for reductions.
6) In both cases, we saved mega-bucks.
7) No seller wants to have the buyer back out at the last minute.
8) They are afraid it will take a long time to relist, show, and close the second time.
9) It is a great little tactic.

As the seller (we just closed last week), I would tell you no. I get your earnest money, right? And most buyers probably have to move and need the house as much as the seller. I would gamble on that. It's hard to find a house that you like. And I guess it's market dependant.

I'm a person of my word, though. If I agreed on a price, then that is the price. Is the sale price not legally binding after the contract is signed? Barring any contingencies of course...

 

[writersblock42]

I think you should be happy that your house is selling. It is so much easier to find something than to sell what you have. But do not buy something until everything is signed on your property. Way too risky.

 

[BCmomma]

Man it must suck to sell a house in the US. This would never happen in Canada. Once you have the closing date it's set in stone unless both parties agree to move it. But if one party does not agree then the original closing date stands and you cannot change it. Financing is approved before all the conditions come off. If you lose your job or your financial situation changes after the conditions have been met but before you close that is too bad - you have already agreed to buy that home and you have to follow through.

 

[BCmomma]

1) OK, I will admit to a sneaky little ploy.
2) We have moved seven times due to job promotions and job changes.
3) Twice, we thought the seller was unreasonable during negotiations.
4) The seller would not budge enough.
5) So, AT THE CLOSING TABLE for we asked for reductions.
6) In both cases, we saved mega-bucks.
7) No seller wants to have the buyer back out at the last minute.
8) They are afraid it will take a long time to relist, show, and close the second time.
9) It is a great little tactic.

Seriously? That's heinous. What a horrible thing to do. You're probably due for some awesome karma that next time you try to buy a house.

 

[ronandannette]

Man it must suck to sell a house in the US. This would never happen in Canada. Once you have the closing date it's set in stone unless both parties agree to move it. But if one party does not agree then the original closing date stands and you cannot change it. Financing is approved before all the conditions come off. If you lose your job or your financial situation changes after the conditions have been met but before you close that is too bad - you have already agreed to buy that home and you have to follow through.

Completely different system there and it DOES seem bizarre...I'm a professional in this field and no matter how much research I do I still can't fully understand how it works or why on earth they do it that way...

 

[lost*in*cyberspace]

Seriously? That's heinous. What a horrible thing to do. You're probably due for some awesome karma that next time you try to buy a house.

 

[LadyBeBop]

Our closing horror story;

We had our loan approved within 24 hours of buying our new house. Unfortunately, the the other bank (the buyers of our old house) did not even start investigating the buyers until a couple of days before closing. It was only then they found out that the buyers lied on their mortgage application...they had been unemployed for six months.

Took us another two months to sell our house...at nearly $10K less.

 

[ronandannette]

Our closing horror story;

We had our loan approved within 24 hours of buying our new house. Unfortunately, the the other bank (the buyers of our old house) did not even start investigating the buyers until a couple of days before closing. It was only then they found out that the buyers lied on their mortgage application...they had been unemployed for six months.

Took us another two months to sell our house...at nearly $10K less.

Then what happens...do you get to keep their deposit? I'm truly astonished...here a real estate transaction can not go firm until PROOF of financing is provided to the seller's brokerage agency in the form of a (legally binding) mortgage commitment from the buyer's lender or an agreement from the present lender to allow the buyer to assume the existing financing. The onus is on the lender to qualify the buyer and the property (very strict federal regulations for income to debt ratio and the property MUST appraise for at least as much as the selling price). Until financing is confirmed the offer is "conditional" only and there is a time limit specified in the contract for conditions to be satisfied. If financing can't be arranged by that date the deal dies unless the seller agrees to an extension. (Conditional deals are also subject to additional offers coming in during that period but the seller must give the buyer First Right of Refusal at the agreed upon price and terms). Realtors almost never continue to show properties that are C/S and almost all homebuyers get pre-approved for a mortgage amount before they start shopping.

 

[Good Morning Dewdrop]

1) OK, I will admit to a sneaky little ploy.
2) We have moved seven times due to job promotions and job changes.
3) Twice, we thought the seller was unreasonable during negotiations.
4) The seller would not budge enough.
5) So, AT THE CLOSING TABLE for we asked for reductions.
6) In both cases, we saved mega-bucks.
7) No seller wants to have the buyer back out at the last minute.
8) They are afraid it will take a long time to relist, show, and close the second time.
9) It is a great little tactic.

the seller for the house we're in now tried to pull a fast one - less than a week before closing she said that since we were closing on a Friday we couldn't have the keys to the house until Monday when it had been properly registered or something (some kind of paperwork thing).

We maintained that once we handed over the $$ it was our house and we would expect the keys at closing. So I told our agent that we would walk if she wasn't going to give us the keys. I would have walked because a) she pissed me off and b) we were being moved by a company (Wal-Mart) and the truck, drivers and moving folks that came with it were only ours on that Saturday. So if we didn't have the keys we would have had to get a storage unit and literally move into it.

She "caved" gave us the keys and lo and behold whatever paperwork there was went smoothly - go figure.

As for Rusty's tactic - as a seller I would have walked away from the table and relisted (although I would have kept the deposit) - trying to 'play ball' at the table is beyond tacky.

 

[seashoreCM]

Man it must suck to sell a house in the US. This would never happen in Canada. Once you have the closing date it's set in stone unless both parties agree to move it. But if one party does not agree then the original closing date stands and you cannot change it. Financing is approved before all the conditions come off. If you lose your job or your financial situation changes after the conditions have been met but before you close that is too bad - you have already agreed to buy that home and you have to follow through.

Is the closeing date set in stone for the financing bank too? The buyer may have to follow through with buying the house if he loses his job but if the bank pulls the rug out (pulls the financing out) at the last minute then the buyer is likely unable to come up with cash (all cash) to complete the purchase normally. In that case, if the buyer or the buyer's attorney was savvy enough, either the closing date changes (or disappears complete) or the seller accepts monthly payments instead of the purchase price up front (takes back a mortgage) for as long as it actually takes for the buyer to get new reasonable financing in place.

Renegotiating the price at the closing table should not be an issue because the price was (should have been) agreed upon long in advance. If the buyer pulls a fast one here he stands to lose his earnest money deposit.

 

[ronandannette]

Is the closeing date set in stone for the financing bank too? The buyer may have to follow through with buying the house if he loses his job but if the bank pulls the rug out (pulls the financing out) at the last minute then the buyer is likely unable to come up with cash (all cash) to complete the purchase normally. In that case, if the buyer or the buyer's attorney was savvy enough, either the closing date changes (or disappears complete) or the seller accepts monthly payments instead of the purchase price up front (takes back a mortgage) for as long as it actually takes for the buyer to get new reasonable financing in place.

Renegotiating the price at the closing table should not be an issue because the price was (should have been) agreed upon long in advance. If the buyer pulls a fast one here he stands to lose his earnest money deposit.

There IS NO SALE until financing has been secured. An offer is only "conditional" until there is legally binding confirmation of a mortgage provided to the seller's broker. Once this is in place the bank CAN NOT back out of the loan (and in order to have gotten the mortgage approval in the first place the buyer would have had to verify that any "cash to close" would be available by the closing date). If your financial situation changes before closing you are still legally bound to the sale. In these cases the buyer would likely re-list and sell the house immediately or risk defaulting on the mortgage. (BTW, defaults/foreclosures are pretty rare in Canada because of the RIGOROUS requirements to qualify for mortgages.)

 

[sweetdana]

When I married my husband 13 years ago, he had a fine home to sell.

The first buyer backed out at the last moment.

The next buyer didn't show up at closing. Like we were literally sitting there waiting to start and they never showed up.

If someone can't afford to own two homes, never close one without having the first one sold.

And to the fellow who showed up at the closing table expecting and asking for reductions. I would have smiled and said thank you but no thank you and we would have walked out. With your deposit. Just sayin...

It is nearly impossible to actually keep a EMD. (LO 8+ yrs and uw for 2 more). EMD are good faith, but you can have your loan denied for anything, and usually get it back. Ie hey Mr LO I'm thinking I might quit my job next yr, or demolish this home and build new... Both will get your loan denied, and get you your depo back.

Not saying it is right, this is a mean and cold thing to do to someone's dreams. I couldn't imagine being that heartless to think this is a reasonable way if doing into others as you would want them to do onto you. Karma for me would never allow this.

 

[Shelly F - Ohio]

NO DON'T DO IT..

My BIL has tried to sell his house since March. The first buyer fell threw because he got laid off a day after signing the contract
Another buyer fell threw because during the underwriting time period he had turned in his resignation in order to take another job The bank denied him the loan after the underwriter call his current employer to verify if he was still employed and the employer told them his last day will be on such a such date because he had turned in a resignation letter.

Don't put all your eggs in one basket. I know you are eager to get into the new house but that feeling with still be there when you have signed the closing doc's for your old house.

 

[Suz D]

1) OK, I will admit to a sneaky little ploy.
2) We have moved seven times due to job promotions and job changes.
3) Twice, we thought the seller was unreasonable during negotiations.
4) The seller would not budge enough.
5) So, AT THE CLOSING TABLE for we asked for reductions.
6) In both cases, we saved mega-bucks.
7) No seller wants to have the buyer back out at the last minute.
8) They are afraid it will take a long time to relist, show, and close the second time.
9) It is a great little tactic.

We were in a legitimate situation like this and were up against a wall so we had to close.

We were moving to another state. A month before we moved we found out my mother had just a few months to live. We closed on our old house, rented it back for a week, moved our stuff out and came to our new state to close. The closing got pushed back from 8:30 Monday morning to 4:30 Monday afternoon. Our stuff was to be delivered 8:00 AM Tuesday morning. At closing the sellers handed us a check for $300 and said they discovered a water problem when they moved some stuff in the basement. What the heck? We didn't know what to do (I was an emotional train wreck at the time and just couldn't think it through). We took the $$, and closed because we didn't know where we'd put our stuff, where we'd live while it was being ironed out, who to call to fix it, who to have move our stuff once it was all settled.

It ended up costing nearly $2000 to fix. Ouch! Wish we would have been able to hold out to get the repairs made at their expense. They had us over a barrel. We put our stuff in the house the next day, unloaded a few boxes and closed the door behind us. Went to be with my mom who passed way 4 weeks later. Horrible time in our lives.

 

[okeydokey]

1) OK, I will admit to a sneaky little ploy.
2) We have moved seven times due to job promotions and job changes.
3) Twice, we thought the seller was unreasonable during negotiations.
4) The seller would not budge enough.
5) So, AT THE CLOSING TABLE for we asked for reductions.
6) In both cases, we saved mega-bucks.
7) No seller wants to have the buyer back out at the last minute.
8) They are afraid it will take a long time to relist, show, and close the second time.
9) It is a great little tactic.

Wow, what a terrible thing to do. Do you think the seller didn't need that money? I can't imagine actually agreeing to something and then weasling out after giving my word.

 

[FayeW]

There IS NO SALE until financing has been secured. An offer is only "conditional" until there is legally binding confirmation of a mortgage provided to the seller's broker. Once this is in place the bank CAN NOT back out of the loan (and in order to have gotten the mortgage approval in the first place the buyer would have had to verify that any "cash to close" would be available by the closing date). If your financial situation changes before closing you are still legally bound to the sale. In these cases the buyer would likely re-list and sell the house immediately or risk defaulting on the mortgage. (BTW, defaults/foreclosures are pretty rare in Canada because of the RIGOROUS requirements to qualify for mortgages.)

I'm in the industry too, and things must be much different in Alberta than they are in Ontario. Here, once you waive your conditions it's a firm sale and you are obligated to close or be subject to losing the deposit and legal action. Proof of financing is not required by the sellers' real estate agents or lawyers. Some real estate agents request confirmation that financing has been obtained but it is not required. In Quebec, on the other hand, you do have to fulfill all mortgage financing conditions before they will allow the clients to waive financing.

All of the mortgage commitments make reference to financing being withdrawn if there is a material change in either the property or financial status of the applicants. If they change jobs or get fired a week before closing, don't save enough for their down payment or didn't pay off debt that they agreed to pay out prior to advance they may no longer qualify for the mortgage and they will pull the financing.

Appraisals are rarely required for purchase financing here, even on conventional mortgages (most lenders use an auto valuation tool) although a few still require them conventionally. The appraised value doesn't HAVE to be at least the purchase price, but the lender is going to lend the money based on the purchase price OR appraised value, whichever is less. If it doesn't appraise at the purchase price the purchasers have to make up the difference out of pocket.

What I will agree with you on, though, is that once the purchase conditions are waived it is a firm sale and there is no "changing your mind" at closing...from either the purchaser or the seller. Friends of mine had a firm offer on their house. Literally the day after the purchasers waived financing they had career offer to transfer out of the area. They took the offer and ended up being sued and paying $10K in fees to my friends, plus their legal costs. Had they not waived their conditions they could have just walked away from the offer.

 

[Praying Colonel]

.

 

[TheRustyScupper]

. . . If I agreed on a price, then that is the price. Is the sale price not legally binding after the contract is signed? Barring any contingencies of course...

1) Yes, the signed contract is the sales price.
2) However, the Buyer or Seller can back out anytime prior to paying money at Closing.
. . . either can try to sue
. . . but, legal cost usually outweigh the gain
. . . plus, it could take years to go to court
3) You may or may not lose the Earnest Money.
4) But, most of the time, the Buyer HAS TO CLOSE.
. . . they have already bought another house
. . . they are in the process of moving to another city or state
. . . they haven't had many bites and are afraid of not selling again for a while
6) I have also seen the Seller come to Closing and ask for more money.
7) The Closing Company FREQUENTLY comes to the table and wants more money.
5) Let's face it, like ALL selling situations
. . . the Seller wants as much money as possible
. . . the Buyer wants as little money as possible
. . . the Closing Company wants as much fees as possible
6) It is still, THE ART OF THE DEAL.

 

[hlg22]

1) Yes, the signed contract is the sales price.
2) However, the Buyer or Seller can back out anytime prior to paying money at Closing.
. . . either can try to sue
. . . but, legal cost usually outweigh the gain
. . . plus, it could take years to go to court
3) You may or may not lose the Earnest Money.
4) But, most of the time, the Buyer HAS TO CLOSE.
. . . they have already bought another house
. . . they are in the process of moving to another city or state
. . . they haven't had many bites and are afraid of not selling again for a while
6) I have also seen the Seller come to Closing and ask for more money.
7) The Closing Company FREQUENTLY comes to the table and wants more money.
5) Let's face it, like ALL selling situations
. . . the Seller wants as much money as possible
. . . the Buyer wants as little money as possible
. . . the Closing Company wants as much fees as possible
6) It is still, THE ART OF THE DEAL.

"The art of the deal." : Let's call it what it is - you're taking advantage of people who likely have no other options at that point (movers paid for, new home purchased or under contract, etc.) by forcing them into concessions that you couldn't legitimately get at the negotiating table after the home inspection. So shady.