Does it Makes Sense to Buy a New House
before Selling the Old One?
that, although it is great for his
clients as sellers, those same Jeff decided to come up with a spreadsheet wherein, if
clients face challenging hurdles he plugged in some assumptions, he could figure out if it
when buying a replacement would make economic sense to acquire a new house
property; competing against other before selling an old house. The other part of the
buyers, some with cash only offers, equation was to find a lender who would allow for a
who are willing to bid up a property homeowner to purchase a new home without first selling
far beyond the asking price in many the old home; thus, carrying two mortgages at the same
circumstances. Some buyers are time. Since most conventional lenders would not touch
just so frustrated with the process this, Jeff had to look to alternative sources. He found a
of competing and getting outbid company called Pacific Private Money, in Novato, CA that
that they act in ways that they specializes in such a product.
normally would never have thought.
Overbidding. Settling for a house Pacific Private Money can
that they may not have originally lend enough to the
envisioned. The list goes on. borrower to purchase the
new home if there is
Jeff, however, decided to think enough equity in the old
outside the box. What would home to justify a
happen if another house was combined Loan to Value
purchased [without the added [LTV] of 70% or less.
pressure of “living out of a Sometimes, if there is not
suitcase”, if you will] prior to the enough equity in the old home, the borrower needs to
sale of the old house? Is it even add cash to bring the LTV to 70%, but, the ability to
possible with the banking purchase a new home without having to sell the old one
regulations that were placed upon first can solve many issues for the homeowner. First, the
financial institutions as well as a new home can be identified without adding pressure
homeowners over the past decade since the homeowner is still living in the old house until
due to the “mortgage meltdown” the new house closes escrow. Second, the stress of
that happened in 2008 and on? moving twice is eliminated. Third, and probably the best
Dodd Frank rules that placed [and possibly most surprising] is that this solution may
inordinate restrictions on the ability actually cost LESS in terms of increasing net equity to
of homeowners to obtain financing the household than selling the old house and buying a
left many people unable to get new house with the proceeds from the old house [and
loans in which they previously were new mortgage] in most circumstances wherein the new
easily able to qualify. house is more expensive house than the old house.