Think you are losing money when selling? Think again!Posted on December 4, 2011
Once again this year seems to be a very tough market for many homeowners, especially those who would like to sell their home. From all indications the market at least on this side of the state has hit bottom. And that is why there is one group of sellers that have an incredible opportunity that may not last much longer. They have the opportunity to not only wipe out their potential loses, but make money as well. Who is this you might ask? That would be the move up buyer, or in other words, the seller who will be purchasing a more expensive home than their current one.
Let me explain: Let’s say that you paid $200,000 for your current home but now the market is down 10% and it is only worth $180,000. That is a $20,000 loss. OUCH!
But let’s say that you bite the bullet and purchase a home that was once worth $400,000, but now you can purchase it for the same home with a 10% discount as well or $360,000. That is a $40,000 savings; minus a $20,000 loss equals a $20,000 net gain. That’s pretty good!
Now I’m a person that likes to take it a step further. Let’s look at a hypothetical situation. Consider if the market were UP 10% since and you bought your home for $200,000 and you could sell for $220,000. That would be a $20,000 gain and that would be great because you would have more buying power to move up? This is where you need to think again.
Now you are ready to invest the “extra” $20,000 you have and you still want to move up. So the $400,000 home is now worth $440,000. That $40,000 increase in purchase price minus your $20,000 profit equals a $20,000 LOSS when compared to the situation that we have right now!
Ok, that is all well and good but now consider this. What if you go ahead and make the move right now to a larger home. You do exactly what was stated in the first scenario and realize that $20,000 net gain. Let’s imagine that in 8 to 10 years the housing market recovers and we see a 10% gain in the prices of homes. The homes that are worth $180,000 today will be worth $198,000 and the homes that are worth $360,000 right now will be worth $396,000. So by moving right now and anticipating a 10% gain in the next 8 to 10 years you realize not only the $20,000 net gain right now plus another $36,000 in a 10% gain over the next 8 to 10 years. You would then be $56,000 ahead of where you are right now. Now couple this with the incredibly low interest rates and that should be enough to make you want to put the for sale sign in the yard right now!
It’s all about your perspective when dealing with Real Estate! By thinking that you are losing $20,000 right now and being all depressed about it you might just miss out on making a lot of money in the long run.
Author: Shelley Frody
CITY2SHORE Real Estate
December 4, 2011