(ran HP HS editions)
Question: My husband and I are in a real mess. About six months ago we started looking at new houses to buy. Our three children are now in college, so we were thinking about buying a house just for the two of us. We saw a beautiful home in a great location with three bedrooms, a wonderful kitchen, a giant family room, and even a swimming pool. This house has been for sale many months, so the builder is extremely anxious to sell and he made us a terrific deal.
No complaints about that. But we told him we had to sell our old home to get our equity out, so we can afford the new home. "No problem," he replied. But we didn't read the fine print in the contract. It says the sale is contingent upon sale of our old home within 90 days. We put up a $10,000 good-faith deposit on the new house. Then we listed our old home for sale, but it hasn't sold. Not even a nibble.
Meanwhile, we qualified for a mortgage on the new house, subject to sale of the old house. But we can't find a bank to make us a "bridge loan," so we can use our old home's equity to buy the new house. The builder's attorney has written us a letter giving us 30 days to close our purchase or lose our $10,000. We have learned this tough builder is known for taking advantage of stupid buyers like us. What should we do? _ Myra H.
Answer: Now you know why I constantly remind readers to sell the old home before buying a new one. Apparently you failed to carefully read your purchase contract and it was not contingent upon the sale of your old home. Instead, it gave you only 90 days to sell your old home.
A bridge loan could solve your problem, but you say you have already tried the local banks and been "declined." That is not unusual, because banks are very wary of making equity loans to home sellers because of the high risk.
Another alternative is to offer to trade in your old home on the new home. The builder may not be excited about this offer, but if he sees a potential profit he might accept. You could discount the price as much as necessary to appeal to the builder's greed. That's better than losing your $10,000 earnest money deposit and not buying that new home you want.
Robert J. Bruss is a nationally syndicated columnist on real estate. Write to him in care of At Home, the Times, P.O. Box 1121, St. Petersburg, FL 33731-1121. Questions of general interest will be answered in the column.