Our Housing Chain Broke and We Need to Sell Fast or Risk Losing Our New Home
When Ryan and his wife had their offer accepted on a new home, they envisioned themselves moving in within months and getting settled right away. They had already found a buyer for their property, and all that was left to do was complete both deals. But just one week later, that vision was shattered. At the last minute, the buyer pulled out because their financing had fallen through.
Everyone has heard nightmare stories of property chains collapsing, but Ryan never thought it would happen to him. He didn’t know what to do. The completion date for the new house was within a week, so it was too late to find a new buyer. But Ryan needed to sell his existing home to pay the downpayment. Faced with the prospect of losing his dream home, Ryan called us up to see if we could help.
What are Some Reasons a Chain Collapses?
A property chain collapses when someone pulls out of buying your home, or pulls out of buying the home of either the person you are selling to or the person you are buying from. As a result, everyone gets held up and you could miss out on the opportunity to buy the home you’ve searched so hard to find. There are several reasons why a chain might collapse, and unfortunately you don’t have any control over most of them.
- Buyers can’t finance their purchase. Obviously, this is something that everyone looking to buy a house should sort out beforehand. In most cases, buyers will take out a mortgage to facilitate the purchase. Most buyers will agree on a mortgage amount with a bank before looking for a property. Others, however, may wait until after they have put in an offer on a property, only to find that they can’t obtain a large enough mortgage to cover the cost of the house. Despite record low mortgage rates, some people still can’t get the financing that they need in the first place. In cases like these, the buyer may loan money from a friend or relative who can pull out of the arrangement at any point.
- One of the party gets made redundant. Unfortunately, people lose their jobs every day, and with it the opportunity to buy a new house. Without enough income to pay mortgage costs, or get a mortgage in the first place, the potential buyer will be forced to remove themselves from the process until their financial situation improves.
- Disputes between buyers and sellers. Disputes between the two parties can happen right up to the date of completion. One common cause of disputes is when a survey finds underlying problems that need repairing, leading to an argument over who should pay the cost. Alternatively, if the potential buyers arrange a final viewing of the property, they may find that the property didn’t live up to expectations and was missold in some way. The buying party may also try to buck the system by offering the sellers a lower price right before completion and threatening to withdraw from the process unless it is accepted.
- Buyers get cold feet. At the end of the day, the buying party may just get cold feet and decide they don’t want to buy a new property at this time. Maybe they had a change in circumstances or believed that they could find a better property at a later date. The recent election may have shaken their confidence in the property market, for example.
At the end of the day, it often comes down to money. This is one of the problems with operating in the San Diego property market. We have one of the strongest and most expensive markets in the country. While this means sky-high prices for sellers, it also means that many first-time buyers can struggle to finance their first purchase, ultimately leading them to pull out of the sale.
What To Do If Your Buyer Pulls Out And Your Chain Collapses:
If your property chain collapses, there a couple of avenues open to you. But it may mean kissing goodbye to that new house you spent so much time looking for.
- Accept that you’ve lost your new home and move on. This isn’t what most people will have in mind, but it’s going to seem like the only option for most people. It means you’ll be able to get a better price on your current property since you aren’t pushed for time. And who knows? Maybe an even better home will come onto the market in the coming months.
- Relist your property. If you still have a month or even a few weeks left until you complete on your new home, it may be worth relisting your property in the hopes of finding another buyer. However, because you’re pressed for time, you’re going to have to be willing to accept a lower offer. That’s if you can find a new buyer at all.
- Extend the mortgage on your existing home. If you extend the mortgage on your current property, you should be able to get enough equity to afford the down payment on your new home. However, there are some risks. You’ll need to exchange contracts on your new home first to avoid getting taken advantage of. Otherwise, if that sale falls through as well, you’ll be left with lots of debt capital just sitting accumulating interest. If you struggle to sell your old home, you may also end up owing more than you can afford to pay.
- Get a bridging loan. This is a high-interest loan that is secured against your current house which allows you to pay the downpayment on your new property. You pay the loan off when you sell the property. This is even more risky than extending the mortgage on your home, however. You’ll need to sell the house very soon after taking out the loan, otherwise interest will quickly build up. Moreover, if property prices fall, you may be left with no way of paying off the loan.
The steps you take immediately following the collapse of your property chain are crucial. Act smartly and quickly, and you could salvage your new home. Make the wrong decision and you could be stuck in your existing home for months or years.
Sell Fast, Sell Direct
Ask Ryan today and he’ll tell you he made the smart decision. He refused to give up and accept that his dream home had passed him by. He didn’t want to relist his property and play the waiting game again. But he also didn’t want to risk financial ruin by extending his mortgage or taking out a bridging loan. That’s why he came to see us.
At Sell Your House Direct, we buy any properties in the San Diego area fast and for cash. You can receive a valuation on your existing property within 24 hours of making the call. And because everything can be completed within a week, you’ll be able to use cash from the sale to complete on your dream home by the deadline. If your chain’s just broken and you need to sell fast, give us a call, and we could be completing the purchase of your home a week from now.