If the economy is finally showing improvement, why would you ever want to sell now? Why not wait a bit until things really pick up and property values start to rise? Valid questions indeed, but before we can answer those we need to answer this: why are you selling at all?
Let’s set a stage and presume to begin with that you have enough equity to sell, pay closing costs and commissions and have enough money to put a down payment on a replacement property. So back the original question, why sell at all? First the obvious: You’re getting divorced, have a job transfer, lost a spouse, or lost a job; all reasons largely or completely beyond your control, necessitating a move. So really there’s no question here, you’re selling now rather than wait for an upswing in prices because you have to.
The less obvious: Growing family, better job/higher income, you got married, you want to. You’re selling now because you need to and want to and you recognize the opportunity to benefit. In other words, your situation has changed for the better and you realize prices are down as are interest rates. Therefore, if you sell now, while your place is down, so too is the place you’ll be buying. Thus the “delta”, or difference, between the existing property and the replacement property is such that any increase in your existing property would also mean a greater increase in the replacement property. Example: If you were to wait for your $500,000 home to appreciate 10%, it would rise to $550,000. However, it is likely that the replacement property would mirror that appreciation and if that property had a current value of $800,000, and went up the same 10%, it would rise $80,000, essentially costing you $30,000 more. Further that would mean higher property taxes, and we don’t know where rates would be at that time? Plus, very often better properties appreciate faster and more than inferior properties, so it’s conceivable that the replacement property could go up faster and higher than your property costing you even more by waiting.
But what if prices deteriorate further? True, this is a possibility but consider what you would have accomplished: we’ve established that your situation has changed for the better and you really wanted to buy “up”, which you’ve now done. So you’re living in a nicer place, maybe larger, maybe with a bigger yard, maybe with the view you always wanted, maybe with the pool for the kids, maybe in the school district that’s better for your special needs child or with the better music program or sports team, maybe it’s got the extra room for the baby or for mom; maybe it’s got the big closet for your wife or the 3 car garage you always wanted… catch the drift here? You’ve upgraded! Since you just upgraded and your situation is improved, you’ve got no intention of selling so who cares what happens in the immediate-near term with values? Ahhh, real estate is a long term investment isn’t it? Yes it is and to repeat, you just upgraded your situation for the long term, and that sounds pretty darn good doesn’t it?
Published on 2011-04-14 08:34:05