Real Estate Broker, EcoBroker, Certified Residential Investment Specialist & Diamond-Platinum MDC
Real Estate Broker, EcoBroker, Certified Residential Investment Specialist & Diamond-Platinum MDC
Your Connection to Portland Real Estate
Windermere Stellar | 733 NW 20th Ave. Portland, OR 97209|Office: 503-220-1144|Email: sgoddyn@windermere.com
Buy Before You Sell--The Oregonian 7/17/05
Fast-moving market can push buyers out of comfort zone Sunday, July 17, 2005 By KATHY BROCK The Oregonian A former river guide in the Grand Canyon, Alexander Brown is accustomed to taking well-studied risks.

Now he and his wife, Talia, are taking a risk in real estate.

The couple purchased a home in Bend two years ago, remodeled it from top to bottom, then discovered that Alexander couldn't take classes in Bend that he needed for his newly chosen career in nursing.

Moving to Portland for school was a logical choice for the couple and their 9-month-old son, Elliot. In order to get a home they wanted in the fast-selling real estate market, however, they decided they couldn't make a purchase contingent on the sale of their Bend home.

Betting that their home would sell quickly upon listing, the Browns decided they'd buy a Portland home first. That way, they wouldn't be forced into a snap buying decision or renting temporarily.

"Having dogs and a child -- it's very hard for renting," said Brown. To rent also meant finding a month-to-month option and paying security deposits.

Their Bend home more than doubled in value over two years, allowing the Browns to take out a home equity loan to help cover the down payment on a new home, plus mortgage payments and living expenses until the home sells.

Although they owe $100,000 on the Bend home, "we're looking to walk away with a big chunk of cash," Brown said.

Still, the couple recognize the potential pitfalls to buying a new home before selling the old.

"You do take the risk of being stuck with two mortgage payments," Brown said.

The Browns also wanted to postpone the sale of the Bend house a bit longer so that they pass the two-year ownership mark required by law to avoid paying state and federal capital gains taxes.

After the Bend home sells, they plan to use the profits to make payments on a new mortgage for two years while Brown attends school and to start a college fund for Elliot.

They've made house-hunting trips to Portland, and Brown already is commuting a few days a week from Bend to attend classes. That arduous drill may be over soon, though.

In late June, the Browns were negotiating to buy a home in Southwest Portland's Vermont Hills neighborhood. They were having inspections done and hoped to seal the deal soon.

"It's a hard-nosed market out there," said Alexander. After a few other failed attempts to buy a house in Portland, he said, "I think this one's probably a go. Cross your fingers for us."

Editor's Note: The Browns' purchase was due to close July 15.

2005 The Oregonian

We Can Help You Make the Right Move
Buying before selling: For some, results are worth the risk Sunday, July 17, 2005 By KATHY BROCK The Oregonian Tony and Cheryl Ambroza outgrew their Sellwood condominium after the birth of their son, Jackson. They wanted to buy a new home in a close-in, family-friendly, upscale neighborhood -- where, brokers say, the most sought-after houses are.

They wanted to be able to act fast in the event that they found a desirable home in their price range.

"Metabolism for the marketplace is so high," Tony Ambroza said.

So, rather than ask a seller to wait for them to sell the condo before closing a deal, the Ambrozas obtained an equity loan on their condo. As a result, they could negotiate for an immediate home purchase -- giving them, they hoped, an edge over other buyers interested in the same house.

"Time is of the essence," said Nader Sabahi, a broker with RE/MAX Equity Group. "When there are multiple offers, the seller becomes very selective."

Historically, buyers could afford the luxury of making a new purchase contingent on the sale of their existing home. Today, however, the Portland area's low housing inventory and a hot market have combined to give sellers more power when it comes to demanding the smoothest, fastest dealings -- often at prices that are bid up by competing offers.

Buyers who ask sellers to wait are quickly pushed aside if there are any other offers, according to the Ambrozas' broker, Suzanne Goddyn of Windermere/Cronin & Caplan Realty Group.

"Especially if it is a new property on the market, don't even think about it," Goddyn said, adding that about eight of every 10 deals she sees these days don't involve sale contingencies.

"They call them 'bumpable buyers,' " said Mark Solon, a broker with Stellar Realty and Management. "You want to avoid that word if you possibly can. In today's hot market, you can only make it contingent if it's a last resort."

Solon said he's handled one contingency deal in the last year -- and even that one took only two weeks to resolve.

Not every buyer can afford to make a noncontingent purchase, but those who can are doing so because they fear rising interest rates and home prices, said Kim Schwabauer, a mortgage consultant with Usher Financial Group. "That's the bottom line."

Matter of math

Area mortgage brokers say that financing has gotten easier for buyers who aren't able to carry debt outright on a second property. Mortgage brokers outlined several common financing methods buyers can use, including bridge loans, equity lines of credit and what's known as low-documentation loans. A traditional bridge loan offers a borrower short-term financing to cover the down payment on a new home. Most buyers are familiar with bridge loans, Schwabauer said, but often this loan product is not the best answer because a borrower must qualify for the initial mortgage, the interest-only payment on the bridge loan and the new mortgage payment.

"The lender makes money on charging higher fees for (the bridge loan) because they know they're not going to keep it very long," said Schwabauer. "We don't move people that direction if we don't have to."

Equity lines of credit on existing homes typically cost less than a bridge loan but may take more time, Schwabauer said.

"It helps if you already have it established," said Peri Henderson, senior mortgage broker with Directors Mortgage Inc. She noted that oftentimes, the loans take three days before they're activated. That allows an unsure borrower time to back out of the deal, but can be a frustrating wait for those who need to act quickly.

"Right now, with the market the way it is, you have got to have your ducks in a row," said Henderson. "If you see a house you want, you've got to go for it."

A buyer also must have equity in his or her home, be able to qualify for the loan and expect to pay some fees. Setting up a line of credit before putting the home on the market is a wise move, according to area mortgage brokers. Henderson estimates that about 75 percent of lenders decline to open up credit lines on homes listed for sale.

There are also loan options that don't require the full income and asset documentation of a conventional loan, Schwabauer said. The interest rates are slightly higher, but these loans serve those who don't have adequate equity in an existing home or the ability to qualify for other loans.

Known in the industry as "low-documentation" loans, these products are for borrowers who have good cash flow and good credit ratings -- even if they're already committed to sizable mortgages. The loan is based primarily on the borrower's credit rating and ability to pay some cash at closing.

However, Schwabauer said, "you really need to have good advice on it." Buyers can wind up over their heads in debt if they're not careful, she warned.

"You have to have a plan. It really is an exit strategy prior to obligating yourself to a new purchase. It's a math equation."

Buying time

The Ambrozas' equation was a $40,000 equity loan and a new home loan on which they put down 5 percent, with an additional 15 percent to be paid off when the condo sale closed. The remaining 80 percent they planned to use as the actual home loan.

They budgeted to be able to comfortably maintain the condo for several months if it didn't sell right away.

The Ambrozas wanted to avoid feeling pressured to sell the condo for less than they wanted, but they also wanted to have the resources to pounce quickly when they found a home they liked. The financing they arranged gave them that flexibility.

Goddyn, the Ambrozas' listing agent, also advised them to make sure their condo was ready to sell the second the new deal was complete. She said she gives all of her clients the same advice: reduce clutter by moving items into a storage unit, touch up paint, freshen the landscaping -- and clean.

Pricing a house right also is critical, Goddyn said, because potential buyers might be put off if they question the home's value. Alternatively, she said, an attractively priced property may entice several bidders and, thus, drive the price up.

Unless there are other extenuating factors, she said, homes priced in the $350,000 to $500,000 range that don't sell in two weeks in the current market are likely overpriced.

Higher-end homes priced at $500,000 or more likely will sell within three months if priced right, said RE/MAX Equity Group's Sabahi.

"It's so neighborhood-dependent," added Goddyn, with houses in "hot neighborhoods" going quickly in all price ranges.

In addition to prepping a home for sale, Goddyn, Sabahi and Solon each recommend that buyers get their financing in order before seriously shopping for a new home.

Once he and his wife qualified for an equity loan, the decision to move ahead with a purchase before selling the condo was "kind of that leap of faith," Ambroza said.

Luckily, the landing was successful. After being outbid on a few houses, the Ambrozas bought a $450,000 home in the Grant Park neighborhood. It not only has the additional space they wanted but also has a small yard and a playhouse for Jackson.

Fortunately, their Sellwood condo sold the first weekend they listed it.

Even with the plan's degree of uncertainty, Ambroza said he'd do it this way again.

"As stressful as these things can be, it's not like we're moving out and they're moving in on the same day," he said.

RESOURCES

Suzanne Goddyn, Windermere/Cronin & Caplan Realty Group Inc., 733 N.W. 20th Ave.; 503-497-5016; www.susakandgoddyn.com Nader Sabahi, RE/MAX Equity Group Inc., 9790 S.W. Nimbus Ave., Beaverton; 503-495-4986; www.nadersabahi.com

Mark Solon, Stellar Realty and Management, 1503 S.E. Harrison St.; 503-293-0285; www.stellarrealty.org

Kim Schwabauer, Usher Financial Group, 805 S.W. Broadway, Suite 1825; 503-595-1600; kim@usherfinancial.com

Peri Henderson, Directors Mortgage Inc., 4500 S.W. Kruse Way, Suite 275, Lake Oswego; 503-317-9825; www.homeloan24-7.com

Kathy Brock is a Portland free-lance writer. She can be reached at kat_brock@hotmail.com.

2005 The Oregonian

Keep a green bough in your heart and the singing bird will come...Chinese Proverb
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