Now A Good Time To Trade Up
6th August 2011 | category [ Coronis Articles ]
Many homeowners are holding off from putting their property on the market as the media continue to report a market downtown and uncertain financial times. But the ‘best time to sell’ is often not what it seems.
Some people sell to retire and buy something smaller. This article does not refer to them. But the majority of sellers at any given time is trading up to a bigger property to house their growing family or reflect their increasing wealth. These home owners - who will pay more for their next home than they will get for the one they are selling – actually do better when the market is on the decline. The fact that they are spending more money second time round gives them an opportunity to make money on the transaction. If the reason they think it’s ‘not a good time to sell’ is because they ‘will not get a good enough price’ for their home, then the logical next step is to realise that if the market prevents them from getting the price they want, it will also affect the sellers of the property they are trading up to – with a net gain to the person who is trading up. If you get $603,000 for your home which has been valued at $670,000, you may feel you are ‘losing’ $67,000 or around 10% of the value of your asset, but if you buy another home valued at $850,000 in the same market, the owners of that home will also ‘lose’ 10%, as you will naturally not be paying more than the current declining market value. In paying 10% less you will pay $765,000, 'saving' $85,000 - thereby 'making’ $18,000 on the transaction; in other words you ‘saved’ on the next transaction more than you ‘lost’ on the sale of your current home, so you are ahead by $18,000.
In fact, there are other advantages to trading up in a buyers’ market. Because prices are stable and properties often take longer to sell, once vendors have sold their original property there is no rush to buy. They can take their time choosing and negotiating their next purchase without having to watch the gap between the price they got for their original property and the price they have to pay for their next one increasing at an alarming rate.
Some people sell to retire and buy something smaller. This article does not refer to them. But the majority of sellers at any given time is trading up to a bigger property to house their growing family or reflect their increasing wealth. These home owners - who will pay more for their next home than they will get for the one they are selling – actually do better when the market is on the decline. The fact that they are spending more money second time round gives them an opportunity to make money on the transaction. If the reason they think it’s ‘not a good time to sell’ is because they ‘will not get a good enough price’ for their home, then the logical next step is to realise that if the market prevents them from getting the price they want, it will also affect the sellers of the property they are trading up to – with a net gain to the person who is trading up. If you get $603,000 for your home which has been valued at $670,000, you may feel you are ‘losing’ $67,000 or around 10% of the value of your asset, but if you buy another home valued at $850,000 in the same market, the owners of that home will also ‘lose’ 10%, as you will naturally not be paying more than the current declining market value. In paying 10% less you will pay $765,000, 'saving' $85,000 - thereby 'making’ $18,000 on the transaction; in other words you ‘saved’ on the next transaction more than you ‘lost’ on the sale of your current home, so you are ahead by $18,000.
In fact, there are other advantages to trading up in a buyers’ market. Because prices are stable and properties often take longer to sell, once vendors have sold their original property there is no rush to buy. They can take their time choosing and negotiating their next purchase without having to watch the gap between the price they got for their original property and the price they have to pay for their next one increasing at an alarming rate.
Source: localpropertynews.net