Do I Need A Down Payment on My Next Home?
So, I received a phone call (kinda) this past weekend. First off, it is amazing what you can do with all of the technology available today. An old friend from high school that I haven't talked to or seen in a really long time called me via Facebook Messenger, because we had lost touch but still follow each other on social media. They asked me a very good question that many people have and usually are too afraid to ask in fear of feeling stupid.
The question was this:
If I wanted to sell my current house to buy another one, would I still need to put a down payment on the new house?
It's a fair question since they have a lot of equity in the current house. Where many people get confused is in the promise of how much cash they will have once they sell.
The short answer is yes. The complexity kicks in when it comes to negotiating a deal to buy a house when you haven't sold your current home yet. You have to look at the situation as 2 separate scenarios. You selling your house, and you buying the next house.
The seller has nothing to do with you and your current home and usually all they care about is getting the money they feel they deserve for their home. So whether you sell your house is of no concern to them as long as it doesn't affect their bottom line. They are going to want an earnest money deposit to sense your sincerity.
The kicker is negotiating a contingency of selling your house to have the cash to buy their house. The ideal situation is a contingency with no kick out. What this means is you will uphold your end of the deal once you sell your house and the seller can not kick your offer out if someone else presents an offer to purchase their house. You are "locked in." A contingency with a kick out would mean you have a predetermined period of time (stated in the contract) to either sell your house or improve your offer if someone else presented an offer.
I was glad I had a chance to reconnect with an old friend, as the whole call wasn't just business. It truly is amazing how far technology has come. I remember it vividly calling good old 411 when you didn't have someone's number and now we can just hop on social media to reach out over the phone. Not only did it feel good to reconnect but helping a friend felt good enough to share the love. Fire away with any real estate questions that you have and I will write about it.