 |  | | Buyer In A Bunny Suit: What Every Buyer Should Know - by Mark G. Jackson | | So…you have decided that your current home is not meeting your needs anymore and that you want to buy another one. You begin looking in the real estate periodicals and visiting open houses until one day you find the home you are looking for. You decide to make an offer, but what you do not realize is that at this point you are actually a seller not a buyer. Real estate professionals fondly refer to you as a buyer in a bunny suit. | | Many of us have been in this position before and have squeaked out of the transaction by the skin of our teeth. For some this is a position they are able to handle by being able to obtain a bridge loan for both properties, or by being financially able to carry two mortgages. But for most, this is a position that is not only impossible to sustain, but one that in the long run costs you a substantial amount of money. By putting yourself in this position, you lose your leverage in negotiating the most lucrative deal on both the sale of your current home, as well as your new home. Let me show you why. | Now that you have found the home of your dreams that fits your current needs, you will need to make an offer contingent on the sale of your current home. Many sellers look at this as a very risky transaction and will reject your offer. But let’s say for arguments sake that they accept it. Because of the risk involved, they most likely will want a full price offer to satisfy their interest since there is a possibility that your home will not sell and they will be back to square one. On average you can expect sellers to come down from their asking price about 3%. Using the example of your new home asking price being $250,000 (which by the way is probably bigger and more expensive than your current home), that means that in this part of the transaction you have lost $7,500. | Your New Home Asking Price $250,000 |  Your Current Home Asking Price $200,000 | Now you have the challenge of getting your current home sold. Because of the contingency of your offer to purchase the new home, you have a time limit before the contract expires. You are under the gun to sell because you so desperately want your new home. Offers come pouring in but nothing that is really acceptable to you. Now, down to the wire, another offer comes. It is higher than most of the offers you have received but still not what you were hoping for. But you really want your new home, so you accept the offer of $190,000. The excitement of now being able to move forward to the new drowns out the fact that you have lost $10,000 on the sale of your current home. | | Because of your loss of negotiating power in both transactions, you have lost a whopping total of $17,500. To most people, that alone is a lot of money. Let’s take it one step further. Assuming you are going to take a mortgage on your new home at 6% for 30 years, that figure begins to multiply at an alarming rate. This will increase your monthly payment by $105. That doesn’t seem so bad, huh? Multiply that by 12 months which is an additional $1,260 per year. Still not convinced? Multiply that by 30 years, and you arrive at a loss over the course of your mortgage totaling $37,800!! | 17.5 (Number of $1000’s)
x 6.00 (Mortgage factor at 6%)
$105.00 (Addtl. monthly payment) x 12 (Months per year)
$1,260.00 (Yearly loss) x 30 (30 year mortgage) = $37,800.00 (Total loss) | | Are you starting to see the consequences? The importance of selling your current home first before making an offer on the home of your dreams is something to seriously consider. Having the power to negotiate is a must if you want a “win-win” situation. Real estate transactions can be extremely prosperous, so think carefully before hopping into something that will hurt your basket full of cash! For more information, please contact me. |
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