Help in Home buying

[Catkins]

I'm the worst at financial understanding, so am looking for advice and insights here. Are there financial pitfalls to buying next home with cash and Then selling our current home.

We have lived in our home for 24 years and it will sell quickly once put on the market. I don't want to get caught between homes and feel rushed to settle for what's ever on the market at that time.

Ideally we can find next perfect home and then sell current home. We do want to move ASAP, but I don't want to settle on a marginal home. I just don't know if there would be financial issues. Thanks for any advice you have.

 

[RetiredHappy]

If you have money sitting around and don't incur significant capital gains taxes from sale of positions in taxable brokerage account, or income taxes if withdrawing from IRA account, then by all means pay cash for the next home. You can also borrow from your taxable account through your brokerage without liquidating your account, and pay back the loan when you sell your current home.

It's chicken and egg. You can sell your home first and have a long closing, while you look for a new home and try to synchronize concurrent closing, so that you have the money to pay for the new home. Alternatively, you can find the home that you want and try to stretch out closing, while you sell your home and time for concurrent closing.

 

[pb4uski]

What we did it we bought the new home with a pledged asset line of credit collateralized by my brokerage account (~8.4% interest but no fees), sold the old home and then used the proceeds from the sale to pay off the pledged asset line of credit. Easy peasy.

 

[sengsational]

If you have the money, the overlapping ownership is a nice way to make the process of moving less stressful. You also can't mind paying double for housing during the overlap.

The cost of owning a home is pretty big, even if you don't have a mortgage. You could start with the opportunity cost of the value of your current house. How much per month would you earn if your liquid portfolio was higher by the value of your current house? How much per month in property taxes? How much per month in insurance? That's probably most of it. It's probably many thousands per month. That's the down-side I see, and it's only money

 

[Koolau]

I agree with what's been said. If you can come up with the money without jumping through too many hoops (and triggering a lot of taxes) I'd buy with cash and then sell.

I agree too with sengsational that owning a home is very expensive - with a lot of the cost being unrecognized unless you really drill down on them (opportunity costs being a biggie!) That's just one reason I don't think of my home as an investment even though it might well go up in value (but that's another thread.)

Keep us posted on what you decide, Catkins - and remember that YMMV

 

[RetiredHappy]

I have owned multiple homes concurrently, bought and sold etc. After we retired, we tried to own only one home. When we decided to sell our fancy penthouse condo at end of 2020 to move to a single family home, we really did not want to be owning 2 homes at the same time.

We told a realtor that we wanted to sell our condo at our price, not at comps because there were no comps out there that would even come close to what we owned. She agreed not to list our home for sale and kept it as a "pocket" listing. 3 days later, she had a potential buyer and I ended up showing the home because she and her co-partner really had no idea about the condo. Mind you, they are local and top real estate agents in terms of high end home sales. Anyway, the buyers made an offer and we accepted and we agreed to close in 3 months.

I wanted to wait for the perfect home to show up and was willing to rent while we waited. My husband insisted on buying something that was "good enough". We went and put money down on a new development, with double fairway and water frontage views from our back (premium lot). We also selected and paid for all the upgrades. 2 weeks later, the perfect home came up, not listed yet, and my realtor called us when the owners spoke to her about looking at selling their home. We looked at the home and agreed to pay asking price. We lost money on the deposit and upgrade of the other new home because we were past the 5-day cooling off period.

We managed to have concurrent closing, i.e. our home sale closed 2 days before the new home closed and we stayed at a local hotel for 5 days. It can be done, but it's also dicey, as in our case we lost quite a bit of money when trying to buy a "good enough" home.

 

[OldShooter]

Good advice here, but be prepared for the worst case where you have to close on the new home and something has prevented your planned sequence of events from happening. A year ago our new construction lake home was scheduled to be available for occupancy mid-summer, so we accepted an offer on our former lake home with a delayed closing to Sept. 1 and an agreement that we'd negotiate a further delay as necessary. Our buyer' buyer then came on the scene with a hard date to move into their new home and suddenly our flexible Sept. 1 date became a hard date. The new house schedule slipped, of course.

So, on August 30 we moved all of our stuff into a storage unit and went home to our city house for the two months it took for the new house to be available. Fortunately we did have that house to live in!

Maybe you'll get lucky and things will go smoothly, but always have a Plan B and a Plan C in mind and keep your ears to the ground listening for the rumbling of an incoming problem. After a year you'll laugh about it but as it's happening it will not be fun.

Or ... maybe things will go smoothly for you! Good luck!

 

[Koolau]

Good advice here, but be prepared for the worst case where you have to close on the new home and something has prevented your planned sequence of events from happening. A year ago our new construction lake home was scheduled to be available for occupancy mid-summer, so we accepted an offer on our former lake home with a delayed closing to Sept. 1 and an agreement that we'd negotiate a further delay as necessary. Our buyer' buyer then came on the scene with a hard date to move into their new home and suddenly our flexible Sept. 1 date became a hard date. The new house schedule slipped, of course.

So, on August 30 we moved all of our stuff into a storage unit and went home to our city house for the two months it took for the new house to be available. Fortunately we did have that house to live in!

Maybe you'll get lucky and things will go smoothly, but always have a Plan B and a Plan C in mind and keep your ears to the ground listening for the rumbling of an incoming problem. After a year you'll laugh about it but as it's happening it will not be fun.

Or ... maybe things will go smoothly for you! Good luck!

NEVER trust a builder. Period.

 

[savory]

My new home search would be to start with a buy vs rent calculator. I could have copied one but do not have a recommendation. There are many.

On this thread sensational was the first one to make the suggestion to weigh a home buying financial decision. I am not the best person to do this but I think E-R subscribers would be providing great support to other members by recommending a buy vs rent calculator as we do for retirement timing considerations.

 

[RetiredHappy]

Buy vs. Rent comparison is purely financial. If you have the money, owning your own home is superior, psychological and everything else.

 

[Koolau]

Buy vs. Rent comparison is purely financial. If you have the money, owning your own home is superior, psychological and everything else.

I tend to agree but there are lots of issues which complicate the calculation. In our case, we do both! We own in the Islands and rent on the mainland. That may need to change soon. Our rental may be sold at some point in the near future, leaving us to find other mainland accommodations. Not looking forward to that.

 

[savory]

Buy vs. Rent comparison is purely financial. If you have the money, owning your own home is superior, psychological and everything else.

I have money and I have rented and owned. Right now and in some of my other life circumstances, renting was a superior choice. As I age and think about inheritance, taking the burden of selling a house off our children's responsibilities is also preferred.

 

[MC Rider]

You can sell your home first and have a long closing, while you look for a new home and try to synchronize concurrent closing, so that you have the money to pay for the new home. Alternatively, you can find the home that you want and try to stretch out closing, while you sell your home and time for concurrent closing.

This is what we did. Closed both escrows the same day and moved the next day. Moving truck arrived a day later. It worked out but it was tense at times. Buying with cash then selling the old place sounds less stressful if you can swing it.

 

[Catkins]

I have owned multiple homes concurrently, bought and sold etc. After we retired, we tried to own only one home. When we decided to sell our fancy penthouse condo at end of 2020 to move to a single family home, we really did not want to be owning 2 homes at the same time.

We told a realtor that we wanted to sell our condo at our price, not at comps because there were no comps out there that would even come close to what we owned. She agreed not to list our home for sale and kept it as a "pocket" listing. 3 days later, she had a potential buyer and I ended up showing the home because she and her co-partner really had no idea about the condo. Mind you, they are local and top real estate agents in terms of high end home sales. Anyway, the buyers made an offer and we accepted and we agreed to close in 3 months.

I wanted to wait for the perfect home to show up and was willing to rent while we waited. My husband insisted on buying something that was "good enough". We went and put money down on a new development, with double fairway and water frontage views from our back (premium lot). We also selected and paid for all the upgrades. 2 weeks later, the perfect home came up, not listed yet, and my realtor called us when the owners spoke to her about looking at selling their home. We looked at the home and agreed to pay asking price. We lost money on the deposit and upgrade of the other new home because we were past the 5-day cooling off period.

We managed to have concurrent closing, i.e. our home sale closed 2 days before the new home closed and we stayed at a local hotel for 5 days. It can be done, but it's also dicey, as in our case we lost quite a bit of money when trying to buy a "good enough" home.

Yes, a good enough home is my nightmare!

 

[Catkins]

This is what we did. Closed both escrows the same day and moved the next day. Moving truck arrived a day later. It worked out but it was tense at times. Buying with cash then selling the old place sounds less stressful if you can swing it.

Actually did that 23 years ago, it was tense, but I always thought it would work out and it did
Stars don't feel aligned this time, probably because I'm so much older and pickier. Love the house we have customized.

 

[Koolau]

Actually did that 23 years ago, it was tense, but I always thought it would work out and it did
Stars don't feel aligned this time, probably because I'm so much older and pickier. Love the house we have customized.

I always say "When in doubt, don't."

 

[MC Rider]

When in doubt, gas it!

 

[Jimmie]

We bought our forever home before selling our over-sized empty-nest home. Took all the stress out of the process by moving at our speed. Paying cash for the home also gave us a huge advantage. Seller had many offers but ours was the only all-cash offer. We moved out of our empty-nest home before placing it on the market.

 

[pb4uski]

Buy vs. Rent comparison is purely financial. If you have the money, owning your own home is superior, psychological and everything else.

...to some or many people. Some people are perfectly fine renting rather than owning. It's not one size fits all.

I have a friend that owns in Florida and rents year round in Vermont even though she is only here for 5 months when Florida is miserably hot and humid, and she is very happy renting.

 

[pb4uski]

I have money and I have rented and owned. Right now and in some of my other life circumstances, renting was a superior choice. As I age and think about inheritance, taking the burden of selling a house off our children's responsibilities is also preferred.

Yes, some friends sold their home and rented late in life, principally to make things esier for their executor and heirs... and it did... when they passed it was just a matter of disposing of their personal belongings and handing the keys to the landlord.

 

[pacergal]

Yes, some friends sold their home and rented late in life, principally to make things esier for their executor and heirs... and it did... when they passed it was just a matter of disposing of their personal belongings and handing the keys to the landlord.

This is most likely what we will do. DH would like to remain in our home for life, but we both recognize the emotional attachment our DD has to this house (Grandpa built it, I was raised here and then so were my kids). We don't want our DS and DD to be fighting about selling after we are gone and DD does not need a second home.
We have already told our daughter our plans, so she has time to absorb it. Our DSIL has thanked us when we mentioned our plans! We don't plan to sell probably until late 70's (we are 67). And find a nice, smaller place to rent, most likely condo so easy to lock and leave for traveling if we want.

 

[RetiredHappy]

This is most likely what we will do. DH would like to remain in our home for life, but we both recognize the emotional attachment our DD has to this house (Grandpa built it, I was raised here and then so were my kids). We don't want our DS and DD to be fighting about selling after we are gone and DD does not need a second home.
We have already told our daughter our plans, so she has time to absorb it. Our DSIL has thanked us when we mentioned our plans! We don't plan to sell probably until late 70's (we are 67). And find a nice, smaller place to rent, most likely condo so easy to lock and leave for traveling if we want.

Presumably I will outlive my husband since he is 14 years older than me, the plan is for me to move closer to my son, i.e. back to California, if I cannot convince him to move in with me. If I move back to California, I will sell this home after a couple of years and to buy a home that my son would move in with me since his home is much too small for the two of us. That way he won't need to sell my home after I am gone. Alternatively, if we keep separate homes, moving to some sort of high end senior independent community will be attractive since he won't have the hassle of trying to sell my home after I am gone.

 

[Koolau]

I don't worry too much about dying while still owning a house or condo. Yeah, it's a hassle to sell your parents' home but not really that big a deal. We did it with both sets of parents. We probably did not get top dollar, but we turned most of the w*rk over to a realtor and just said yes or no to the offers. The hardest part was emptying the houses. That issue could well be true even if parents are renting when they pass.

Sure, a nice chunk of money in a bank account someplace is an easier inheritance than a house or condo, but the sale of the latter are not insurmountable - even at a distance. YMMV

 

[MC Rider]

The hardest part was emptying the houses.

If you really want to make your heirs job easier, unload all that crap you got laying around.

 

[Koolau]

If you really want to make your heirs job easier, unload all that crap you got laying around.

Heh, heh, workin' on it. Of course, I'm sure our kids will just get a dumpster and pitch everything. What could be easier?

DW did most of the w*rk in cleaning out mom's house. She went through thousands of old cards that mom had saved. Yes, do you kids a favor and get rid of all that stuff.