Buying A Home “Non Contingent” On The Sale Of Your Current Home

January 31st, 2012

In some real estate markets, the close-in DC Metro area being one of them, the market is strong enough that sellers will not accept an offer contingent on the sale of the potential buyers current home. Sellers figure in a strong market, why should they accept an offer based on a buyer that has a house to sell, and who knows if the buyers are realistic, will price it to sell, and will do all the right things to market and sell it quickly. So sellers wait to get a non-contingent offer, because they know one will come along soon enough.

As a result, I get some buyers who ask me to get them qualified to buy a new home, without the new loan being contingent on the sale of the current home they own. I get asked if bridge loans exist so that they can get the equity out of their current home to use as a down payment on the new home they want. A bridge loan is a loan made based on the equity in the current property owned, that will give the buyer the cash to buy a new home without selling it. I don’t know anyone doing bridge loans anymore, but you can possibly get a home equity line on your current home. But there are two problems with that:

1. Banks lending money for home equity loans want to know you plan to stay in the property, and that you will use the money for renovations, investment, etc. If you said you were going to sell the home soon, and only wanted the money temporarily, they would know they were being used as a bridge loan, and would deny the loan. It takes a lot of effort and money to originate, process and setup a new loan. So to have it paid off in a few months, as a bridge loan would be, is of no use to a bank. There is no profit in offering short term financing. And if you chose not to tell a bank you were applying for a home equity line at that you were moving out, they may find out anyway, if your property was on the market for sale, for example. All underwriters have access to the local Multiple List systems and will check to see if a property is on the market for sale.

2. If you manage to obtain a home equity line, it is fairly rare to find that a potential buyer can carry all that debt. There is the mortgage on the current property, the equity line on the current property, and then the mortgage on the new property. You would have to qualify carrying all that debt, as well as any other debt (car loans, school loans, credit cards, etc.); and not many people can.

So unless you have a substantial income and can carry all the above referenced debt, it is hard to make a non-contingent offer, because bridge loans do not exist, and home equity lines are hard to get when you are moving out of your current home, and its hard to qualify carrying all that debt.

The next option is to double move. This means sell your current home, move into temporary housing, then find a new home. With your home sold you would have already realized your cash gain and can make a non-contingent offer. Of course, many potential buyers push back on this idea because no one likes to move twice, once to short-term housing, and once again to the new house you eventually find.

But there are no other options usually, unless you have a rich Uncle that can pay cash for a new property for you, and you can pay him back when you sell your old house, and then put a mortgage against the new house. When in a strong real estate market, which I realize are rare in this country currently, you will find yourself possibly having a difficult time if you still have a home to sell.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.​

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