Do you know what a "Contingency
How about a "First Right of Refusal"?
Or a "Bridge Loan"?
What's a "Double Move"?
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
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
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
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."