Here's an uncomfortable housing scenario that's getting more common in this soft market: You put in a contract on a new house. You can't sell your old house. The sellers are getting pushy.
What are you going to do?
More homeowners are singing a "stuck in the middle with you" duet with their real estate agents. It's scary, because you can end up with two houses, three loans, and financial ruin. Or, watching the home you want slip away.
"These bridging homeowners are in nervous circumstances," says Eric Cunliffe, of realestate.com, a website that seeks to generate leads for real estate agents. "They should have one goal: sell that home as fast as they can."
It may help to know that even in a post-bubble real estate market, it doesn't take forever to sell a house.
In many markets, houses are taking almost twice as long to sell as they did a year ago, but they are still selling in just a few months. In California, where the market can seesaw, houses are selling in 54 days instead of the 30 they were turning over in last year. In slow-market Columbus, Ohio, houses are sitting for fewer than 100 days.
So, avoid the urge to panic, and consider these moves if you feel stuck in the middle:
Write a waiting budget
Calculate the monthly cost of what you're giving up by carrying your old home for a while. That would include payments for taxes, insurance, utilities, and the interest portion of your monthly mortgage payment. Once you have a dollar figure in mind, you'll know how much of an actual strain it will be to have both houses for a while. You will know whether it's worth dropping the price to get out of the house fast.
Buy some breathing room
Sign up for the biggest possible loan you can get; rates are comparatively low. That will free you from having to get a specific price for the house you want to sell. Even if you get less than expected, you won't fall short on your down payment for your next house. If, after you've settled on the house you are selling, you want to cut your debt, you can use extra money from the sale of your first house to pay down your second home loan.
There are other short-term financing solutions. If you have sufficient home equity and a home equity line of credit on your first home, you can write yourself a check for the down payment on your second loan. But then you'll have to make three loan payments for a while: on your old mortgage, on your new mortgage, and on your home equity line.
You can also get a bridge loan against the equity in your first home to pay for the move-in costs of your second home, from a lender willing to wait for his money until the first home settles. But they usually last only six months, and can be costly and nerve racking.
Think of alternatives
You can keep both houses for a while and rent out the one you're vacating, but then you've got to be ready to put in the time and effort to be a landlord. You could drop the price of the house you're selling to a desperation level, but you might regret that later.
Be ready to walk away
If your closing date on the new home is approaching and you know you absolutely, positively can't afford both, approach the sellers with a request for a delay. If that doesn't work, prepare yourself to lose the new house. That may be hard to take, but there are other houses out there. And, it's better than losing your shirt.
Take the personality out
A home that's been decluttered and had its rooms painted a neutral ivory shade will move faster than one adorned with your knickknacks. Conventional wisdom holds that a home will sell faster and for more money if it has curb appeal, new carpeting, a good-looking entryway, bread baking in the oven, and almost-empty closets.
Price it right
Even during the boom, real estate agents were telling customers to low-ball the prices of their homes; the ensuing bidding wars would ensure they'd get enough cash. Now they're telling people to low-ball their homes to make sure they sell rapidly. "Don't go the death-by-1,000-cuts route" of lowering the price every month, Cunliffe says.
Linda Stern is a freelance writer. She can be reached at firstname.lastname@example.org.
© Copyright 2008 Globe Newspaper Company.