Hi,
My husband and I are looking to relocate from NYC to CT and we found a great old multi family that needs MOSTLY cosmetic work and would give us probably 20-30K (safely) in instant equity after the repairs are done. The issue we are facing is that we want to go into contract with the property but still have our condo up for sale (It should sell quickly as it is fully renovated and priced to sell) and we were told that in CT, if you do not commit to purchasing the house there is a 48 hour Hubbard Clause if another buyer comes along? Is there another way that we can lock into a contract that will not give the seller an out, (we are going to put in a house inspection clause to be safe) until we are ready to move forward? Obviously as a smarter investor we aren’t going to die if the house sells to someone else BUT we are planning to move into one of the units our selves becuase we are expecting a second child and this house is HUGE even for a multi family. Any advice woud greatly greatly appreciated, we are trying to come up with creative solutions but have hit a mental wall , help
The Hubbard Clause is a contingency clause in a property purchase contract that protects a buyer from having to close on the purchase of a new home until they have successfully managed to sell their current home. Many sellers do not wish to accept these clauses in their sales contracts in case the sales contract doesn’t close.
I am not aware of a specific CT law that imposes any 48 hour timelines on the buyer. Does not mean that there is not a law, just that I am not aware of it. There is, however, something generally called a “kickout clause”. If you submit a purchase offer with a Hubbard Clause, then the seller may counter-offer by adding his own kickout clause. In a nutshell, the kickout clause allows the seller to continue marketing his property to other buyers. If the seller receives an acceptable offer without a home sale contingency, then you will have a reasonable amount of time (usually 72 hours) to remove your Hubbard Clause contingency or the seller can declare your contract null and void.
If you have sufficient equity in your current home, you can avoid the Hubbard Clause entirely.
The first option for tapping into your current home equity is to consider a home equity loan. Under this scenario, the homeowner would apply for a home equity loan on their current home in order to use the equity draw on the new home. At this point, a new loan is needed to close on the new home. Therefore, the homeowner may end up with a first and second on the old home and another new loan on the next home. This does give the homeowner the flexibility of selecting the mortgage they want on the new home and not looking at a refinance after the first home sells. Once the first home is sold, the buyer is left with one loan which satisfies his or her needs.
With this scenario, the homeowner has to be able to have the income to support all three loans, the ability to acquire a home equity loan on the home which is for sale, and the ability to qualify for a loan on the new home with the qualifying gross income to debt ratios.
The second scenario would be a Dual Property Loan (Bridge Loan, or, Swing Loan). This would enable you to use one loan that blankets both properties. Depending upon how much equity you have in your current home, you may be able to borrow up to the purchase price of the new house. This type of loan is a blanket loan and once the first home sells the lien is released on the first home.
ok, but what will happen to them if the first home does not sell and the bridge loan expires. If the bank will not extend what happens then? Will they lose both houses if they can’t get additional funding?