Down payment strategies : RealEstate

Got some questions related to down payments.

Here are the facts: 

  • Been in current house for 10 years

  • Current estimated market value of house is ~$430k

  • Current equity is ~$200k

  • Market value of homes we wish to purchase are ~$500k-700k 

Wife and I are looking to sell in the next 6 months and buy a larger house that supports our lifestyle changes that occurred during the last decade and prepare for the next decade (kids, entertaining, etc.).

The challenge is we live in a hot market (Southern California), and contingent offers basically don’t work (lots of competition with non-contingent buyers, including many foreign buyers who pay all cash). Of course nothing says we can’t put an offer on a house that is contingent on us selling our existing house, but it has a very, very small likelihood of getting accepted. (Friends of our recently tried this and had 0 success, even with one offer that was $20k over asking). Because it’s a seller’s market and relative inventory is scarce, sellers have no reason to accept offers with contingencies. 

So, we are trying to explore strategies that would allow us to be as competitive as possible and place offers without contingencies, but we don’t have the 20% capital in liquid assets for a PMI-less downpayment. A real estate agent we met with recently strongly suggested one strategy which is to obtain a HELOC to give us the necessary capital to put 20% down and then payoff the HELOC from the proceeds of the sale of the current house. Not sure if that is a good strategy or not, hence why I am here asking for advice and other possible solutions.

Appreciate any input or advice you may have.

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