How would you approach this?

[rosarugosa]

I'm trying to help my sister figure out the best approach to a situation, and I would appreciate input from you folks. She currently owns a condo about 1.5 - 2 hrs away from the town where I live with my DH and our Mom also lives in this town. DSIS would like to move back to our town for a variety of reasons. She is somewhat underwater on her condo, but has good earning capacity and is able to pay her mortgage. She doesn't have a lot of cash on hand. She is daunted by the question of whether she should buy a new house first, or sell the condo first, and if she sells the condo first, where does she live while she house-shops? If she buys a new house first, how does she cover both mortgages? Her condo is in a desirable area and should not be difficult to sell or rent. She has three pets, and the two dogs are not really housebroken, so renting somewhere would be a bit of an issue. Mom is allergic to animals, so living with her for a bit is out of the question, and my house is tiny without even a second bedroom. She probably currently has enough cash to either make a 10% down payment on a new house, or pay the shortfall on her current mortgage after she sells, but not both. Should she wait until she has saved more cash? DH thinks if she works closely with a Realtor, the Realtor could help her do both a buy and sell closely timed, since the Realtor would be motivated by the potential for commission on two properties. Any suggestions? Thanks in advance.

[razz]

Never buy a second house until the market is tested on condo is my rule to protect myself. Too many variables can skew a sale very fast. A job can disappear very quickly as well.

Sell the condo and then look for a house. Realtors trying to serve two different markets will have challenges , I think.

[kib]

Sell the condo first!!! Just personal experience, it's hard to be motivated to get it done once you're all set up and buying curtains somewhere else. Rentals are not as easy to come by with pets, but they can be found. I really regret buying the first house DH liked (in Tucson), it really doesn't do it for me at all, and I still have my Bisbee property sitting there getting older by the day.

[rosarugosa]

I should add that DSIS is an RN, so her employment prospects are about as secure as it gets.

[catherine]

I ditto everyone who said DON'T count on the condo selling exactly when you want it to!! I did that, lost thousands upon thousands of dollars as a result.

Are there sublets or month-to-month rentals in your town where she could live between selling and getting a new permanent place? Or, couldn't she simply get a year lease and live in an apartment until she finds the right place?

[iris lilies]

She should sell the condo first, it's crazy to do anything else with her having low cash reserves, an upside down mortgage, and only one income for her household.

When it sells she may have to run around giving notice for her job, finding a new job, finding a place to live. But that's the breaks of being tied down with animals. Her lot would be easier if she could farm out a couple of the pets temporarily while she lives with your mother or rents a room/sublet, but that is AFTER her condo sells. Would you take one of her pets? Would someone else take another? Would your mother put up with only 1 pet? Surely a small one could stay in a closed room and that wouldn't bother her allergies.

Your sister finding a temporary place would be easier with 1 pet instead of 3. Then, with a temporary place, should wouldn't have to rush into a home purchase.

[Spartana]

Ditto on selling the condo first. Once it's in escrow she can start making the serious effort of finding a rental place to live with the pets. Will be hard but it can be done.

She might also check out any short term vacation rental houses in your area. Some allow dogs and can be inexpensive if done on a monthly basis rather than weekly or daily. Especially if it's during the off season. Or she might do something like I did when I bought my mountain house - rent it before buying. I also had several pets (3 cats and 2 big dogs) and knew it would be hard for me to just rent a regular place. So I found a vacation rental house that was also for sale (and came fully furnished and equipped and had allowed pets) but that the owners were OK with renting out before hand on a 6 month basis (a very common thing in that ski resort town and almost every place for rent will say something like "house is currently for sale but the owner will remove the listing with a 6 month lease"). So I found a house I wanted to buy but just rented that once my house was in escrow and just about sold, then eventually bought it a couple of months later - although I wasn't locked into buying it if I didn't want to. Gave me a place to live with the critters and also time to get my house sale finances in order and look around to see what I wanted to buy.

[Gardenarian]

If the market is likely to go up, she should rent the condo for a while (and rent a less expensive place in your town.)
If she is not likely to recoup her investment then she might as well sell now.

[ToomuchStuff]

I am going to go against the grain...........................

SAVE more money first. She will be required to satisfy the mortgage in some form before title transfers (either the cash she has saved, if enough, and remember there are selling costs, or by having some note that binds her financially while letting the property go). During this time she should be watching what the market in her area does and start contacting possible employeement places in your town (if they are that short, maybe they would help with expenses, but I don't think likely). While saving more money her market could go back up and eliminate the upside down.

[rosarugosa]

Thanks for the input everyone; it provides a useful reality check. I should have also noted that she won't be changing jobs. She works in Boston, and will probably end up with a similar commute just coming from a different direction. The market is very high right now in our area, so I think it's a good time to sell and a bad time to buy. I think this might be a good game plan:
Build savings and start scoping out possible rentals
Sell condo
Move into rental
Shop for new house when prices start trending downward
I think the fact that her dogs aren't housebroken is a really big deal. I certainly wouldn't want them peeing on my hardwood floors! A very good friend just moved into a fairly affordable rental loft (old mill building converted to apartments) with cement floors and pets allowed, so something like that might be a good bet for her.
Modest homes in our town have leaped in price over the past 6 months, so I'm guessing that's a bit of a bubble and they will trend downward eventually.

[SteveinMN]

Two items I have not seen mentioned:

- Once (about 15 years ago now) we got caught between a delayed closing on our sold house and the closing on the one we'd purchased. We got a "bridge loan" from our credit union to supply the closing funds needed for the new house, to be paid back by the money made on our previous house. Because the previous house was sold (not just on the market), the amound we made from it exceeded what we had to pay for the new house, and both of us presented stable earning histories, the loan rate was quite advantageous. But -- that was 15 years ago. Mortgage lending is a different world now. I echo the advice of others in suggesting your sister come up with some more money.
- Your sister should be prepared for something in her situation to have to give: either buy less of a house than she'd hoped for; or move more quickly on pushing the price of the condo so it sells faster; or spending more on "in-between" housing because of her pets. Maybe she'll be lucky and it all will fall into place. But she's running on a pretty thin margin right now; preparing for a more-negative outcome might be a much smarter way to proceed.

[iris lilies]

Thanks for the input everyone; it provides a useful reality check. I should have also noted that she won't be changing jobs. She works in Boston, and will probably end up with a similar commute just coming from a different direction. ...

Then selling the condo first is a no brainer. From that point she can see how much money she's got to work with in a new place.