question about closing on new home (1 Viewer)

[Ted Lee]

so here's the deal.

i'm trying to buy a new home. problem is i haven't been in my current home two years yet - two year date will be next april.

when we asked the builder when this phase would be done, they told us june. so, no problem. now we're being told it may be done as early as march. big problem. capital gains tax is about 23 percent - which i can't afford - since i'm relying on my profit to put down on the new house.

so my question is, what are my options? i've been told i can sorta delay the closing date by stating there's problems that i'm not happy with, etc. i don't want to be a jerk to the builder, but i certainly can not afford to close early.

----

the home seems to be coming along pretty well. they have all the framing (including roof and windows) and plumbing up (they're using that cool new flex tubing stuff instead of traditional pvc pipes) -- but that's about it. no roof shingles, electrical, sheetrock, etc. they just wrapped the vapor barrier and put up the chicken wire stuff (lathe?).

can you guess i'm hoping for a *very* rainy winter?

 

[Steve Simm]

I believe that as long as you roll the proceeds of the sale from your old home into your new home then there is no problem. The tax portion only comes into play if you pocket the gains. I'm no expert on this but I believe this is what I have read somewhere.

 

[Ted Lee]

that's what i thought too steve. but (for some reason i don't remember) we have to take the hit. maybe because this is our second home. not sure, but i know my wife talked to my tax attorney and he concurred on the two year rule.

 

[Jeff Ulmer]

I would see what your building contract states as far as completion is concerned. If they told you June, then it is not unreasonable for you to have gotten financing in place for that timeframe. It is also not unreasonable that an early possession date could cause major financial issues, so I would hope that the builder has some room to move when it comes to closing. Have you raised any of this with the builder?

The other alternative would be to sell your current house for an April closing, and get bridge financing to carry two mortgages for a month.

 

[Ted Lee]

thx jeff. we asked the builder about this and (while they weren't steadfast) they gave us the "we normally don't delay closing" speech. the particular person i'm dealing with is a pretty nice guy ... but it hasn't come to push 'n' shove yet. we're going to see what happens as the time gets closer.

regarding bridge financing, our lender mentioned that as a possibility. do you have any more info on the pros/cons of such a thing? iirc, it seemed like a good idea, but i just HATE the idea of taking out another loan. my only salvation is the thought that i anticipate this house appreciating very quickly ... so in the long-run it may be worth it.

 

[Jeff Ulmer]

All bridge financing is is a short term loan to cover the two mortgage payments. This would allow you to hold your current house until your two years expires, while closing early on the new home. If your builder hits a March deadline, you are only looking at financing for a month or two, assuming you've sold your current home.

The better alternative is to urge your builder to either stick with their original timeframe, or accomodate you. Otherwise, you may have play hardball and threaten to walk, but you should see whether there is anything in your builder's contract about early closing, or if they have a completion date you can use as leverage. You could also find "issues" that need fixing, but one way or another your builder should be the one who delays closing until you are ready, within reason. A few weeks isn't going to kill him, especially if it means you taking the matter to court, especially if there isn't a provision in your contract that binds you to early closure.

 

[Ted Lee]

thx jeff ... i'll definitely be looking into those options.