Bob Northern & Company
12540 Patterson Ave
Richmond, VA 23238
Tel: 804-708-9463 • Fax: 804-708-9467
Negotiating Your Contract
I have a home to sell. What are my options?

What is a first right of refusal, contingency and bridge loan.

Do you know what a "Contingency Sale" is? A "First Right of Refusal"?
How about a "Bridge Loan"? What's a "Double Move"? What is a "Seller Rent Back"?

A Bridge Loan often allows a buyer to close on his new home without having to sell his present home. The "Bridge Loan" also allows the buyer to avoid having a "Contingency" or a "First Right of Refusal" clause in his contract. "Bridge Loans" are primarily used by buyers who generally have higher incomes and better credit ratings than most buyers.

A Bridge Loan is when the Purchaser of a home borrows "equity" from his present home in order to make the down payment on his new home. When a buyer uses a "Bridge Loan", he must be financially strong enough and motivated enough to be willing to carry three loans at one time. These loans are:

1. The existing mortgage on his present home
2. The new mortgage on his new home
3. The interest due on the temporary "Bridge Loan"

The buyer must be strong enough to meet the lender's qualifying ratios and financial solvency to be approved on a bridge loan. Most of the time, buyers often back off of this option because they become concerned about the debt they will be carrying and the uncertainty of the time it would take to sell their present home.

One of the last options available to buyers who have a home to sell is to make a Double Move. This is an option most people are reluctant to use at first because of the inconvenience of selling their present home and then moving to a temporary apartment or Mom and Dad's basement for an undetermined period of time. Buyers usually come to this decision after they find that the homes they're looking at in their price range and preferred neighborhoods sell overnight. A volatile market like this makes it impossible for a First Right of Refusal Contract to compete with a contract that does not have a home to sell.

The good news is that once this seller has liquidated his home, he will be in the position of the non-contingent buyer. His only other option to compete would be a "Bridge Loan". It usually takes the buyer losing about 2-3 homes he really liked to acquire the wisdom to make this hard decision.

The Seller Rent Back guarantees the "Seller" that his home is sold and that he will have the funds to close on his new home. The "Seller" closes on his present home but maintains possession until a pre-determined time in the future, usually at a proration of the "Purchaser's" new house payment. This is advantageous to the "Seller" because he knows he will not have the problems of having to sell his home in the future and having to move. The advantage to the "Purchaser" is that the "Purchaser" knows the home is his and nobody can beat him out of it. In addition, the "Purchaser" can guarantee the low interest rates of today rather than what the interest rates will be in the future if they start to go up! Lenders only "lock" their interest rates for about 30 to 60 days without requiring points to "lock the rate."
Click here to return to: Contingency Sale and First Right of Refusal