A Buyer Success Story: Getting Creative.

I recently helped a longtime friend and client, whom I originally helped move out of San Carlos, return to the Peninsula and find a new home. His original plan was to retire out of the area, but he quickly discovered, like many other people who move away, that his children, his social circle, and all of his key interests were actually here. Being that far away was not what he thought it was going to be.

This post is not your typical Realtor postcard bragging about a recent sale. I'm telling this story because it's a great lesson in how getting creative and thinking outside the typical financing box made all the difference for this particular homebuyer.

Setting The Stage.

My client is retired, but he owns his home outright and lives comfortably off the dividends of his stock holdings. Liquidating his stock to purchase a new home would create a massive capital gains tax liability, so that was clearly not an option.

He therefore assumed that he would need to sell his current home first, collect the proceeds of that sale, and then hunt for a home back here on the Peninsula.

Sure, that path can work. But moving homes is analogous to changing jobs; it's best if you have the new job lined up before you quit the job you currently have. For homeowners, that period of “homelessness” in between can stretch longer than you think. Just because you have the funds to buy a new place doesn't mean you'll be successful purchasing it, if you can even find the house in the first place.

The other option would be for him to write an offer on a Peninsula home that's conditional on selling the current home. But no seller in their right mind in this market would accept an offer like that, nor would he be able to attract a buyer for his home if the offer needed to be contingent on him finding his replacement home first.

And neither of these solutions addresses the second hurdle he had: Income. Despite the fact that he owns real estate outright and has substantial retirement savings, he is not drawing Social Security yet, so his income from an underwriting perspective is exactly $0.

The Solution.

I contacted my favorite lender, and we put our heads together to come up with a solution to solve all of the problems outlined above:

Problem #1: Sell current house, then buy the new home.

We put together a bridge loan to access the substantial equity in his current home before he sells it. This would enable him to put down at least 30% on his new home, with the entire down payment and closing costs covered by the bridge loan.

This reverses the sequence of the sales. He can buy the new house first, move into it, and THEN prepare and sell her current home. That means no temporary housing, no moving twice, and no needing to write a contingent offer.

Problem #2: Retired, with no visible source of income.

This is where the solution gets even more interesting.

Because he has substantial assets and owns real estate outright, we were able to qualify him for a purchase loan using an asset depletion calculation. Basically, that entails taking his eligible assets and using them to calculate qualifying income for the mortgage.

The result? He went from having zero traditional income to over $30,000 per month in qualifying income, which easily qualified him for the necessary purchase loan.

Armed with this entirely new financial profile, I was able to land him the perfect home that's close to his family and friends. He doesn't have to sell his current home first, and he can move directly into his new home.

Key Takeaway.

This is a perfect example of how getting a little creative can solve problems that we first thought were unsolvable. Thinking outside the traditional institutional lender's box yielded a perfect solution for my client.

For many homeowners in the same situation, the issue isn't whether they have enough money. It's simply that their money isn't sitting in the right place, in the right form, at the right time.

Feel free to contact me if this solution could benefit you. I would be happy to walk you through the details and connect you with this fabulous lender.