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3/31/13

Bridge Financing Option

Q - I would like to upgrade to a larger home but have to sell my current one.  How would I proceed?

A - I suggest that you place your home on the market and then make an offer conditional on you selling your own home.  Make sure that you list your home at market value or a bit less for a quicker sale.  Also be sure that your home shows well.

Typically, when you place your offer on the larger home, your agent (or the seller's agent will counter with this condition) will include a clause - often referred to as an escape clause -  that will allow the seller to continue marketing the property .  If the seller receives another offer, you will be notified and would have 24-48 hours, depending on the contract, to remove your conditions.  If you can't remove your conditions, the seller will be able to accept the other offer.

To avoid forfeiting the home you have selected, I recommend going to your mortgage broker or bank and arrange for bridge financing.  If you have bridge financing in place, you would be able to activate the bridge financing and be ready to remove your conditions in case the seller of the other home receives an offer.  This would enable you to retain the new home you selected.

When you use the bridge financing option you should be quite certain that your home is saleable and competitive with other similar homes.  Bridge financing is a temporary stop gap and not something you want to carry for any great length of time.  It's a great tool under the right circumstances.


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