How to Safely Make an Offer on a House While Waiting for Settlement on Ours?

BS-19 on 14/12/2020 - 10:23

Hi all,

I would really appreciate some advice on how I can make a good/enticing offer on a house I am interested in buying, after recently selling our house.

e.g.

  1. We sold our house a few weeks ago and have settlement scheduled for (say) 60 days time.

  2. We have found a house we would like to make an offer on, however I just want make sure that I have the right condition/s on my offer to protect myself.

  3. The house we have found appears vacant - which is ideal, so I would like to propose a short settlement that suits the vendor - however I don't want to be paying two mortgages for any longer than I have to - (I'd estimate at least 5-7 days would be ideal to move into the new place).

  4. Am I right in saying that I need to ask the bank for a 'bridging loan' to cover the gap in new purchase and settlement of ours?

Can anyone help me with the wording for the offer please? Should it just be general/broad ie. 'subject to finance'?

Thanks.

Financial

Comments

  • ShortyX on 14/12/2020 - 10:32
    +5

    Sign a contract for the house you want to buy subject to settlement of the house you are selling.

    • BS-19 on 14/12/2020 - 10:35

      Yep - thought this one - but I kinda wanted access to the new house early (if we are lucky enough to get it) - that way I thought we could make the move process easier.. but - if we have to 'move twice' in order to be safe, then perhaps this is the best way.

      • bohn on 14/12/2020 - 11:34

        You can definitely sign a contract subject to the settlement of yours, however, if they have an equiv. offer from someone else without such a clause they will definitely take that.

        • BS-19 on 14/12/2020 - 11:39

          Yep - that's the risk, may lose out. Gotta protect yourself at all times though first and foremost. If we miss out, so be it. Another house will come up, or we can rent something.

          • bohn on 14/12/2020 - 11:48

            @BS-19: If it was absolutely the house you wanted, I would rather get a short-term lease somewhere and not miss out, rather than put a clause that may make me miss out. It all depends on how much you want it though.

  • GG57 on 14/12/2020 - 10:35
    +1

    I would just arrange the settlement dates so that bridging finance is not required.

    • BS-19 on 14/12/2020 - 10:36

      This would be the goal.. but it will take some time to move to the new house, so would want access before we hand over the keys to our current house. Perhaps this is not doable, and as above, we may have to 'move twice'

  • MS Paint on 14/12/2020 - 10:58

    As you move stuff out of your old house you transport it to your new one.

    Have sold/purchased multiple times with same day settlements. It takes planning but it's doable.

    • BS-19 on 14/12/2020 - 10:59

      Sounds hectic! Potentially doable though.. making me think - it might be cheaper/cost effective to hire a removalist company to assist on same day settlement! (Thanks for the idea)

      • MS Paint on 14/12/2020 - 11:11
        +2

        Definitely get the pros to handle the big heavy stuff like fridges and couches. Clothes and crockery can be moved easily in multiple car runs if the two properties are close.

        • BS-19 on 14/12/2020 - 11:14

          Yep! Good idea. Houses aren't too far apart - within 20 mins or so (fingers crossed we get it!)

  • netjock on 14/12/2020 - 12:14
    +1

    Why is your current house settlement not guaranteed? Generally they are, or you take their 10% deposit and sell it on the market for 10% less and it will go like hot cakes?

    Usually the problem is finance.

    • BS-19 on 14/12/2020 - 12:57

      Thanks for your reply. You are correct - the buyer has already put down 10% dep.

      The problem is finance on my end - having the current house settled and funds in my account to then settle the next one.. or otherwise I need 'two mortgages' for a short time.

      • netjock on 14/12/2020 - 13:34

        Generally it is possible to have all three parties settle on the same day. If you are borrowing from the same bank pretty sure they can do something if it is a few days apart.

  • TheMindsetTraveller on 14/12/2020 - 12:21
    +1

    The easiest way is to settle your house and settle the new house on the same day. Many people have done this successfully, there are some risk involved such as if the settlement of your sale is delayed. If this option tickles your fancy, I would be asking the vendors of (vacant) house if you can access the garage (if there is one) a few days before settlement so you can store your goods in there.

    I could be incorrect here but my understanding of a bridging loan is that you will require to be able to satisy the increased in loan cost. Say your existing loan is $300k, and the new house purchase if $450k, you would need to show the banks you can afford to service $750k.

  • jpl on 14/12/2020 - 12:46
    +1

    Talk to your bank, they will most likely agree to a "bridging loan", many friends done this before. Like @TheMindsetTraveller said, if you can afford to service both loans at the same time for the gap. Good thing is you have 1 month (generic term) to start servicing your new loan after settlement, so this period might save you having to pay both loans at the same time.

    Talk to your new home seller, to lease the place at market rate, so that when you settle the old home, you have a place to move in. But the seller will most likely come back with conditions, for example, to have you sign an unconditional contract before the lease and also have the new property's insurance cost beared by you.

    Before you do that, think of the risk that the old home's sale did not go through successfully due to whatever reason, for example https://www.ozbargain.com.au/node/590782#comment-9810875

    • BS-19 on 14/12/2020 - 12:59

      Good points. Thank you

  • Traveller107 on 15/12/2020 - 10:29

    Plenty people make offers conditional to their old property settling. Then get a bridging loan. Also remember early access and early possession are two very different things. Early access Is easy but early possession can be a big can of worms and not something sellers would be keen on.
    Cheers

  • Candour on 15/12/2020 - 19:17

    ask your lawyer to confirm what you do. bridging loans are bad in case something goes wrong.

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