This is a tale of caution for anyone who is trying to time a buy and a sale to close on the same day.  Ilyce recently met couple who lives in Atlanta. They owned a house and also a weekend house on a lake north of the city. Then they decided to shake things up. They first decided to build a new lakehouse, so they bought land and started the process of designing a new home. They hired builders and an architect, and they wrote the first check. This all happened at the beginning of 2015. The property was supposed to be completed by the end of December.  And what’s happening now? “We finally moved into the property in May 2016,” the wife said. “Although we’re still doing some finish work.” Their former lakehouse is now on the market.  While this was going on, the couple decided to sell their primary residence and move to a townhouse that was under construction. They hired a real estate agent for their primary house and put the townhouse under contract. The builder promised he would be done by May.  Given that Atlanta, like much of the country, is an extremely hot market, their primary residence sold in two days. They set the closing date for three weeks after the new construction townhouse was to be finished.  [Modular construction is an increasingly popular way to grow a house]  It all seemed to be going well. In May, the couple sold their primary residence only to then be told by the developer that their new townhouse was months behind schedule. Nervous that the townhouse developer wasn’t being truthful about timing, the couple canceled their contract.  “We wound up in exactly the situation we didn’t want to be in,” the wife said. “We didn’t have a place in Atlanta, near our jobs, and our weekend house is a 2.5-hour commute each way.”  After looking through the limited inventory, they finally found a townhouse in the same development where they sold their single-family house.  “At least I knew I liked the neighborhood,” the wife said.  The husband moved to the weekend house, and the wife “couch-surfed” for three weeks while they waited to close on their new house.  As she was telling Ilyce this story, the wife wanted to know if there was anything she and her husband could have done differently in order to spare themselves the extra anxiety.  When you’re buying new construction, it’s possible — even likely — that the construction will be somewhat delayed or even very delayed. When we bought our last investment property, nearly nine years ago, we bought it off of the plans. The developer was more than six months delayed in turning over the property, and as a result, we lost our window to unload it before the Great Recession kicked in. That said, we were able to hold on to the property and keep it cash-neutral until the past few years, when it turned cash-positive. Rising rents in a recovering housing market helps.  [How to build the custom home you’ve always wanted]  There are two things we would have suggested the couple do differently: First, building a brand new lakehouse is enough stress. That project, the wife shared, was nearly a year behind schedule. If they didn’t need to move their in-town residence because of job considerations, the easier thing would have been to simply wait until the lakehouse was finished and the old lake house was sold.  They could have then leisurely cleaned up and cleared out their primary residence, while looking for a home to buy. Given how hot the market is for homes, we would have suggested waiting until a closing date had been set on the new property, and then putting the primary residence up for sale. The risk, of course, is that the market then changes, the new home is completed and then it takes quite some time to sell the home you could have sold in a hot market for a lot more.  Although it would have been difficult to time the buy and sale exactly, the easier thing is to always buy before selling, because then you can work on getting your new property in move-in condition or do any work you need to before you live there.  But managing two properties for sale (the lakehouse and the primary residence) along with a new construction project (the lakehouse) and a failed new construction purchase is a recipe for disaster — or at least a massive headache.  As long as interest rates stay low, families stay in their homes longer and the rate of new construction stays 30 to 50 percent below normal levels, the housing market is likely to continue to be hot. For sellers, this means you’ll have a tougher time finding a place to buy than selling your existing residence.  But remember that the housing market appeared hot in 2007 to many, and then homeowners who waited to sell couldn’t for some time or sold for at a price that was so low they were severely disappointed.  Use that to your advantage.  Ilyce Glink is the creator of an 18-part webinar + ebook series called “The Intentional Investor: How to be Wildly Successful in Real Estate” as well as the author of many books on real estate. She also hosts the “Real Estate Minute” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them at ThinkGlink.com.
REAL ESTATE MATTERS | You could either wind up with no place to live or have to pay the mortgage on two properties.