I'm planning to move to a different region in the US on a tight schedule. I have enough equity in my current primary residence to pay for a down payment on a new home, but since I'm on a tight schedule, I can't wait to put down an offer until the sale closes. I'd also like to be able to waive contingencies in a purchase offer.
I'm not 59 1/2 yet, but it's still possible to take an IRA distribution tax-free if I put the money back within 60 days (in which case it counts as a rollover for tax purposes, even if I put it back in the same account).
The timeline would look something like this:
- Accept an offer on house 1
- Withdraw from my IRA
- Make an offer on house 2 with contingencies waived and a fully underwritten pre-approval from a lender
- Escrow closes on house 1
- Deposit money back into the IRA
- Wire money to escrow for house 2
- Escrow closes on house 2
It seems pretty airtight, especially if I plan ahead of time to back out of the purchase of house 2 (and eat the loss of the earnest money) rather than keep the IRA money and risk a massive tax bill.
What are the pros and cons of this approach? Any other ideas?
Note I've also considered:
- Taking out a HELOC or bridge loan - but banks don't seem too keen on this right now.
- Asking the buyer of house 1 for a rent-back - but in our case we're on a tight schedule and can't afford to add a month to the timeline.
- Using a service like FlyHomes to get a loan with which to make an all-cash offer.