ᐅ Sell an old house and build a new one in a different location

Good morning,

my husband (37) and I (35) have been following this forum for some time and are hopeful for the advice here ;-)

Ten years ago, we built a single-family house in my husband’s hometown (basement, double garage, tractor shed, 709 m² (7,626 sq ft)). Now we no longer feel comfortable there and somehow have lost our connection to the place. We have a son (4 months old) who will likely have few or no playmates in the future, so we have been considering for some time building a new house in a neighboring town (about 4,500 inhabitants).
Since a new residential area has been developed there and some people have already started building, we wanted to secure a plot and purchased a building plot (financed) last year. As we haven’t finalized our plans yet, it was important for us to have a fallback option. Fortunately, in this town, if we decide not to build, the plot goes back to the city. We are of course aware of the financial loss from the financing, property transfer tax, and related costs, but are willing to accept it for such a major decision that must be made carefully. Naturally, like most of us, we worry about what “others will say,” whether the family understands, and whether it all works out financially...

We had discussions with our bank and a real estate agent and have developed the following plan:

- Have the new house planned and start construction next year. Initially, only the shell will be built, financed through a bridge loan from our bank, as our mortgage for the “old” house is still running.

- During this time, we will list the old house for sale online through the agent and possibly find a buyer who will move in only after the construction phase (about 5 to 6 months for interior finishing). The sale price will be paid in advance or as rent by us to allow continuing payments on the new house. With the proceeds from the house sale, we would then pay for the interior finishing, landscaping, and photovoltaic system.

- After completion of the new house, we will move to the neighboring town and the new buyers will move into our old house.

We are now at the point of commissioning the architect/construction company. We just need that final push to go ahead with it. You all probably know how security-oriented we Germans tend to be? There is so much fear of making wrong decisions, losing money, and not being able to turn back. Maybe someone here has gone through a similar project or can offer some good advice!

Thank you in advance for your patience in reading all of this ;-)

LMN2018 schrieb:
The price of the house is paid in advance or paid by us as rent in order to continue financing the new construction.

I think that’s the key issue in your plan: it significantly reduces buyers’ willingness to purchase or ultimately lowers the price. Normally, ownership and liability are transferred upon payment of the purchase price. Very few buyers would want to act as landlords for six more months.

I would recommend arranging a standard bridge loan with the bank instead, which would have temporarily higher interest rates and then be transferred to the new house loan once the sale of the old house is completed.

You can look for a buyer beforehand—the handover date (and purchase price payment) would just be six months later. This is not unusual.

I noticed you mentioned 10 years: depending on interest rates, a full payoff of the old loan might make sense. I believe this is possible after 10 years without additional fees. The conditions should be better now than back then.

We took out an interim loan for 2 years and only paid interest during that period. This loan could be repaid by us at any time, even before the two years ended. After moving into our new house, we looked for a buyer for our old house, which took exactly one week. We could have done this during the construction phase as well, but we didn’t have the time. I’m not sure if you can find a buyer who pays the purchase price but then cannot move in.

Best regards
Sabine

One alternative is building a house with a prefabricated home manufacturer: there is certainly the possibility to pay the main part (or even the entire amount) only at the “end.” Given the current interest rate situation, this is quite plausible.

When selling the existing house, the local demand situation is important: if the demand for such a property is very high, I consider it realistic to continue living in the sold property as a “tenant” for about 3 to 4 months (of course, this is included in the sale price).

If the location is at least reasonably in demand and your house is also acceptable, I see absolutely no problem with selling the house now and then living as a tenant afterwards. We did something similar a few years ago, spending about 1.5 years renting in our “own” house.

LMN2018 schrieb:
Maybe there is someone here who has experience with the same project or others who can give some good advice along the way!

Go for it! You are not the first to build a second house. And it can only get better for you.

However, I would avoid the rental property approach.
We did it so that we negotiated a slightly lower purchase price, received our payment upfront, and continued to live in the house for another 9 months—not as tenants, but rent-free.
Insurance and utility contracts remained in our name during that time.
This can be specified in the notary agreement.