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Can you buy a house the same day you are selling another one?
I know it can be stressful when selling and then buying a home on the same day. The concern is when you need the down payment from the sale of the one home to help buy the other one. How does this work?
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3 Replies
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I would assume a bridge loan would be the way to go in this scenario. If this is an income property scenario a 1031 Exchange is important.
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You can do a 1031 exchange on investment properties. Owner occupant homes, there is no tax consequences on capital appreciation.
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Selling and buying a home on the same day can be rather tricky, particularly when one depends on the property sold to make a purchase. Let’s see how this goes on a normal day-to-day basis:
The Background of Selling the Home
Contingent Offers: When people are selling a house and buying a new one, most purchase the new house contingent on selling the existing one. This means the house purchases will only be made after selling the other home.
Closing Dates: In an ideal world, the closing times of both transactions should be close to each other, if not on the exact date. This ensures that funds from the sale are available for use in the purchase.
Using Proceeds for Down Payment
Proceeds from Sale: Usually, the proceeds from the sale of the current home will be used as an initial payment towards the new house purchased. In most agreements, the sale closes first, and then all proceeds immediately become available after closing.
Escrow Accounts: On some occasions, the lender for the new home directly states that the sale proceeds have to be placed into an escrow account before the new one is completed.
Financing Options Bridge Loans: Where there is a gap between sale and purchase, it is generally advisable to take a bridge loan. This short-term loan can be useful in raising money to purchase a new home before the previously owned one goes on sale.
Home Equity Line of Credit (HELOC): If your current home is highly leveraged and worth a lot, you may consider a HELOC to finance the new purchase before the sale of your current home is complete.
Coordinating Closings Working with Professionals: In some cases, it is important to have the services of a real estate agent and an attorney to help coordinate the different transactions. They will strive to see both closings occur smoothly and in the correct sequence. Title Companies: Such a company would be particularly important in realizing the transactions as it would ensure that all essential documentation about sales and purchases is completed and accounted for. Communication Stay in Touch with Lenders: Maintain both the borrowing lenders for your previous existing home and the one for the newly purchased house to avoid confusion and lack of information on time and requirements.
Contingency Plans: Always have a second option if the sale takes longer. Consult with your real estate agent about the best ways to handle it, including using temporary homes.
It is possible to sell and buy a home on the same day, although such a feat would require great organization. Knowing how the system works and working closely with professionals, you can effect that change without any panic and ensure that money is available for the new purchase.