Fearing a Simultaneous Sale and Purchase
AM 570 Podcast
Column from The Wave
Oftentimes homeowners are intimidated by the thought of engaging in simultaneous real estate transactions. Sometimes folks worry about the possibility of either being left “homeless” or of having to carry two houses for a period of time as a result of the transaction. Most sellers will need the proceeds from their sale in order to purchase their new home while others may not. Whatever the case, sellers need not worry too much if they’re guided by a professional broker who will make sure that both transactions essentially close at the same time. It’s the broker’s duty to provide clients with a seamless transition from one home to another while shielding them from the unnecessary stress that can easily accompany such a major event.
In most instances, I would recommend sellers to first put their house on the market; Once they’re in contract with a buyer, they can then begin searching for their new home. Most real estate sale contracts in NYC call for a 60-90 day window for closing; However, the terms can always be negotiated prior to signing. For instance, the seller (or buyer) may ask for a 90-120 day term instead. Sellers may also ask for a “purchase contingency” meaning that they can break the sales contract with their buyer within a certain period of time should they not be able to find a suitable replacement home. A “sale contingency,” on the other hand, is when a buyer is able to break a purchase contract if they’re unable to sell their house in a predetermined period of time. These are often used when sellers opt to find their new home prior to listing their current home for sale. It’s always best to avoid added contingencies. Remember, there’s usually already some contingencies in the standard contract. For example, just about every contract has a contingency that essentially guarantees that the deed be delivered free and clear of any liens or encumbrances. Most also contain a mortgage contingency that allows a buyer to break the contract, and be refunded their full deposit, should their mortgage application be denied (hence the need for diligent vetting by your broker beforehand).
Logistics also play a big part in scaring folks considering a simultaneous sale and purchase. Again, most people need their proceeds from the sale in order to buy. So how can you sell one and buy another without being left homeless in the interim? A “post-close possession agreement” is a valuable tool brokers use to solve this challenge. It essentially allows a seller to remain in possession of the house they’re selling for a period of time (usually 7 days) after the closing. It therefore allows time for: A) The funds to clear and be used to close on their new home, and B) move the seller’s possessions from their former to future home. Rarely will a buyer will be unwilling or unable to agree to post-close possession. In those rare instances, the broker and attorneys will need to plan on coordinating a “double closing” on the same day by having the buyer of house number 1 make checks payable directly to the seller of house number 2. We generally try to avoid double closings at all costs, but sometimes there’s simply no alternative.
Brokers should be problem solvers who know how to explain, and when to use all of these tools. Successful brokers educate and calm their clients by being masters of their craft. Everything needs to be properly planned, and everyone needs to be on the same page, prior to the attorneys drafting the contracts; That’s the only way to successfully close two transactions simultaneously.
