Home selling/purchase question

[dabuddha]

So I've been looking around for a property to purchase and in my situation, I'll be using the money from selling my home to purchase the new home. How do people normally do these things? I'd like to put in an offer on a couple of houses but my biggest fear is I won't be able to sell my home in time to pay for the new home. Also, I'm a bit confused by the earnest money deposit. I know it's a deposit that will be used towards my down payment but will they cash the check immediately or just hold it until the seller accepts the offer?

Cliffs:
1) How do I purchase and sell a home at the same time when the money from selling the house will be used to pay for the new house
2) Better explanation of the earnest money deposit

TIA!

EDIT: BTW is there a good search tool for house hunting? I've been using Zillow/Trulia but I wonder how I can find more houses or is that it?

 

[Mermaidman]

(Based on my limited knowledge) You place a contingent offer on the house you want to buy. The contingency being that you need to sell your house first. Obviously, your offer will be less attractive to the seller.

 

[dbk]

I think mine got cashed right away even though we went back and forth few times

 

[drebo]

Earnest money doesn't get cashed until the contract is signed. They can't cash it because you make it out to the title company and the title company doesn't get decided until you're under contract. So when you hand over the check with your offer, you make it out to "Title" and the rest gets filled in when the contract is signed.

 

[IHateMyJob2004]

You want to make an offer using the "Hubbard clause".

In a strong sellers market people willl laugh. The way things are today (not a sellers market but things are SLOW, people will laugh.

Listen. You need to sell your house. Then when it sells, make an offer on the house that you like. In all likelihood it will be on the market.

 

[IHateMyJob2004]

Oh, the earnest money thing.

Matters who you know and where you live.

I use a broker I know so he holds the check, it is never cashed and if the deal falls through, I get the check back. Other people do it non refundable where the sellers agent keeps the cash. Your best off just asking your agent. Cause quite frankly ... they are the only ones that know.

For those saying bullshit. my house has been on the market gfor 6 months and we just pulled it. We never signed a single thing with our friend/agent. And this is no mom and pop thing/. It is Caldwell Banker. So it really comes down to your agent. Just ask. it is what they are there for.

ETC ETC .....

In the current environment, worry about selling your home. Where I live we have 100 homes on the market and on average, 4 a month sell. We gave up and decided to put in the land fill we need to get what would normally "upgrade" to.

 

[Red Squirrel]

I can see this being a very tricky situation. I'm guessing you have a mortgage on the existing house? Are you in a position to make the minimum payment + new house payment, for a little while? Even if you have to live off credit/savings for a bit. That's probably what I'd do though that is kinda tricky as well since if you don't sell then you are digging a grave. I was lucky as when I bought my house I was living with my parents. Never had to buy a house while already living in one.

You don't want to wait till you sell your house either, as there may not be houses you like at that point then you'll feel rushed because you'll now have a deadline for the new people to take possession. Unless there's a way you can delay that till you find a house, not sure how that works.

 

[fralexandr]

yep, a lot of it depends on where you live (the buying/selling process might be different; market conditions vary).
As a general rule, winter typically slows the housing market down a bit. Part of that is because there are fewer house buyers and/or sellers.

Around southern california:
1) you'd write an offer contingent on the sale of your house.
2) if you're using a realtor, you'd write the check to your realtor's brokerage/office, so it wouldn't be cashed until escrow.

In southern california on a standard sale, reasonably priced houses typically enter escrow in under a month, and escrow usually lasts 45 days, or more (if there's a lender involved).

Another option is to sell the house and rent a place while you're looking for a place to buy. This will take the pressure off looking for a place & finding a buyer, but will cost you in rent.

 

[OCGuy]

Contingent offer for the new home based off the sale of your current home. It does not make your offer the strongest in a seller's market, but it is done all the time.

 

[OCGuy]

Oh, the earnest money thing.

I use a broker I know so he holds the check, it is never cashed and if the deal falls through, I get the check back.

Uhh...no. As soon as escrow is opened in an escrow state, your check is deposited. I deal with real estate in multiple states, and a broker holding onto your check can get his license suspended.

He may "hold on" to it until an offer is accepted.

 

[T9D]

The most likely only way anyone is going to accept an offer with that contingency is if you are coming in at least asking price or more. In this market you don't want to do that. Just sell your old place, find a new place then and offer less and save a lot of money.

 

[dabuddha]

I can see this being a very tricky situation. I'm guessing you have a mortgage on the existing house? Are you in a position to make the minimum payment + new house payment, for a little while? Even if you have to live off credit/savings for a bit. That's probably what I'd do though that is kinda tricky as well since if you don't sell then you are digging a grave. I was lucky as when I bought my house I was living with my parents. Never had to buy a house while already living in one.

You don't want to wait till you sell your house either, as there may not be houses you like at that point then you'll feel rushed because you'll now have a deadline for the new people to take possession. Unless there's a way you can delay that till you find a house, not sure how that works.

I do have a mortgage on the existing house. I suppose I could float two mortgages for a couple of months but it'd be straining me financially. As for selling my house first, that's my fear (that the house I like will be off the market and there won't be a suitable house).

My situation is I'm looking for a somewhat fixer upper so I can get it cheap and do the work myself. I did that with my first house (paid almost $50k less than the asking price since it was a foreclosure and now it's appraising for almost $150k more than I paid).

As for the earnest money deposit, my concern there was I keep most of my money in my savings account and not in my checking account. So I'd write a check but I'd need a heads up in order to transfer the money over. I was going to put $5000 as my deposit since I was told that a higher amount would make my offer more "attractive"? Especially since my offer is about $20k less than another persons but that person is buying to flip the house and the seller's agent told me the seller is more keen towards this being sold to a family than an investor.

 

[jaedaliu]

Is your current home in a desirable area? If so, list very low and let people bid it up.

What's your purpose of selling & buying? to do a tax free flip?

If I were in your situation (with my wife and no kids) I would buy when I found the house I want, and float the 2 mortgages until the strain was too much, then reduce the selling price so that I can get rid of the mortgage payment. It sounds like you'll make a hefty profit so it doesn't matter too much if you lower your selling price? This of course goes back to your purpose of changing homes. If it's just for profit, timing is more difficult.

Zillow/Trulia are MLS front ends. It's pretty much what real estate agents get access to. The difference is if you get an agent that works in a large office in the area you want to buy; they may have access to homes before they officially get listed in MLS.

Oh, and I would make sure the money is in the checking account from the date on the check. I don't know what benefit you get from having your $ in savings vs checkings, but I would imagine it's less than the potential loss of faith/overdraft fee/bounced check fee from not getting the timing right.

 

[dabuddha]

Is your current home in a desirable area? If so, list very low and let people bid it up.

What's your purpose of selling & buying? to do a tax free flip?

If I were in your situation (with my wife and no kids) I would buy when I found the house I want, and float the 2 mortgages until the strain was too much, then reduce the selling price so that I can get rid of the mortgage payment. It sounds like you'll make a hefty profit so it doesn't matter too much if you lower your selling price? This of course goes back to your purpose of changing homes. If it's just for profit, timing is more difficult.

Zillow/Trulia are MLS front ends. It's pretty much what real estate agents get access to. The difference is if you get an agent that works in a large office in the area you want to buy; they may have access to homes before they officially get listed in MLS.

Oh, and I would make sure the money is in the checking account from the date on the check. I don't know what benefit you get from having your $ in savings vs checkings, but I would imagine it's less than the potential loss of faith/overdraft fee/bounced check fee from not getting the timing right.

My area is in a pretty desireable area but then again, I do see a few houses in my area that have been on the market for quite a few months now. My main reason for selling/buying is we need more room. Our current bedrooms are just too small and our kitchen is a bit small for our needs.

I'm leaning towards the buying and floating two mortgages while I sell my current home. I can ask my dad to help with the financing and pay him back once I'm all sold. If I do put the offer in, I'll make sure and xfer the money to my checking account. I'd hate to lose my .75% interest but I'll live with it

 

[alkemyst]

Talking to a local RE agent should be what you do. They will know your market and the best option for you.

 

[DesiPower]

Earnest money doesn't get cashed until the contract is signed. They can't cash it because you make it out to the title company and the title company doesn't get decided until you're under contract. So when you hand over the check with your offer, you make it out to "Title" and the rest gets filled in when the contract is signed.

Once you are past the option period (typically 7 days), they can keep it after you walk out during contract period if its not seller's fault.

 

[DesiPower]

OP, my sincere opinion, do not rush into it, sell your house first, get the money, then buy the next one. It can get VERY stressful, trying to juggle selling and buying at the same time.

Zillow and Trulia are two best sites, I like Zillow better

 

[cbrsurfr]

If you need the money from the current house then make sure you sell it first. Make plans for some sort of temporary housing when between houses.

Luckily I could afford both houses when I bought my current house. Due to all the foreclosures, houses in my old 'hood were going for 1/3 what I paid. The old house is now a rental as there's no way I could sell it for what I need out of it.

 

[dabuddha]

I agree and think my best bet would be to talk to an agent. I also think maybe using the sellers agent as my agent would probably not be a good idea since there has to be some sort of conflict of interest. I dunno what agents normally charge to sell a house but this guy said he'd take a 4% commission.

For what its worth, the agent emailed me this as a template for the addendum for the offer:

 

[Blackjack200]

Uhh...no. As soon as escrow is opened in an escrow state, your check is deposited. I deal with real estate in multiple states, and a broker holding onto your check can get his license suspended.

He may "hold on" to it until an offer is accepted.

This. The earnest money is deposited into the escrow account. I have no idea how it works in a "non-escrow" state. I didn't even know there were non escrow states. But the escrow is deposited and it will appear as reductive line item at closing.

How does the OP not know this even though he owns a house? Maybe it's been a while and he just didn't remember.

Same with the sale contingency. I mean, usually the contract will have lots of contingencies; contingency for inspection, contingency for the loan coming through, etc.

 

[alkemyst]

This. The earnest money is deposited into the escrow account. I have no idea how it works in a "non-escrow" state. I didn't even know there were non escrow states. But the escrow is deposited and it will appear as reductive line item at closing.

How does the OP not know this even though he owns a house? Maybe it's been a while and he just didn't remember.

Same with the sale contingency. I mean, usually the contract will have lots of contingencies; contingency for inspection, contingency for the loan coming through, etc.

Most home owners don't know the process as they were hand-holded through the process originally.

In all fairness, it really just works better to hire a pro (esp a lawyer) to give the documents a once-over and outline the process/monies you should be going through.

 

[dabuddha]

This. The earnest money is deposited into the escrow account. I have no idea how it works in a "non-escrow" state. I didn't even know there were non escrow states. But the escrow is deposited and it will appear as reductive line item at closing.

How does the OP not know this even though he owns a house? Maybe it's been a while and he just didn't remember.

Same with the sale contingency. I mean, usually the contract will have lots of contingencies; contingency for inspection, contingency for the loan coming through, etc.

Bingo I purchased this house almost 5 years ago and I only gave $1000 for my earnest money dep

 

[dabuddha]

This. The earnest money is deposited into the escrow account. I have no idea how it works in a "non-escrow" state. I didn't even know there were non escrow states. But the escrow is deposited and it will appear as reductive line item at closing.

How does the OP not know this even though he owns a house? Maybe it's been a while and he just didn't remember.

Same with the sale contingency. I mean, usually the contract will have lots of contingencies; contingency for inspection, contingency for the loan coming through, etc.

So if the seller declines the offer, the money is refunded back?

 

[Blackjack200]

Yes, otherwise selling your house would be a lucritive business indeed.

 

[MiniDoom]

If you need the money from the current house then make sure you sell it first. Make plans for some sort of temporary housing when between houses.

Luckily I could afford both houses when I bought my current house. Due to all the foreclosures, houses in my old 'hood were going for 1/3 what I paid. The old house is now a rental as there's no way I could sell it for what I need out of it.

This. I sold my last place, move my shit to storage and lived with my brother for a month while I found a new place. yeah, it was a pain in the ass to move the shit twice, but I didn't want to deal with the stress of timing it right.