Scheduling Closings Carefully when Selling then Buying a Home
If you are selling your home and then buying another you need to carefully consider how you schedule the two transactions.
Simultaneous Closings:
Generally, two alternatives are available for persons who are selling then buying a home. The most common method is referred to as the “simultaneous closing.” In a simultaneous closing, the sale of your existing home is scheduled in the morning and the purchase of your new home is scheduled for the same afternoon. The proceeds from the morning sale are then used to make the afternoon purchase. The dates and times of the transactions are set forth in the respective purchase and sale agreements. You must appear at those times or you could end up in breach of contract.
Staggered Closings:
Another choice is the “staggered closing” where you sell one day and buy on another day (one or two days or even as long as a few weeks later). This extra time gives you a chance to regroup if there is a problem with the first-in-time sale and pull things together so you can have funds to purchase your new home.
In a simultaneous closing many factors must be considered such as the possibility the sale of your existing home may be delayed. If the sale is delayed you may not have enough money to purchase the new home. If that happens you could lose the deposit that you paid on the new home. Many issues may cause the sale to be delayed or cancelled. Your buyer could lose his job between the time he signed the purchase and sale agreement and the time of the sale. Lenders generally will not loan funds to persons without employment; and without a loan, the buyer will be unable to complete the transaction. Further, many times lenders are not prepared on the date the parties have established and will not make the loan that day. Frequently, prior transactions regarding the property, most of which are recorded at the registry of deeds, are unresolved and, once detected, require time to correct. Problems such as these are not unusual and if your sale is delayed you may not have the money to apply toward your purchase. Some of these problems may be avoided if you use the staggered closing because of the extra time afforded between transactions.
Staggered closings can create some of the following problems. Where will you live between the sale and the purchase? What will you do about your furnishings? What are the burdens and expense of moving twice? How will you pay the cost of owning two homes?
Plan ahead to avoid problems: As noted above, each alternative has disadvantages and without planning, you may find yourself in an unfavorable situation. With the advice of an experienced real estate attorney, before you sign any form of an offer, your contracts can be structured so that you have the least exposure to these difficult problems.
You can find more information about buying and selling a home from the Massachusetts Bar Asociation at:
http//massbar.org/media/523742/buysellhouse0605.pdf.