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When the Local Real-Estate Market is Challenging
By Rick Kahler MS CFP® ChFC CCIM www.KahlerFinancial.com
An exciting new medical practice opportunity in another state …. Health problems that make one-level living an urgent necessity …. The need to downsize quickly because of a hospitalist job loss ….
These are just a few of the reasons medical professionals might need to sell a home sooner rather than later. The real problem arises when the local real estate market is a challenging one. Here are a few suggestions for anyone looking to sell a house under difficult conditions.
1. Evaluate the urgency of your situation. If you can wait a few months without harming your career, your finances, or your health, that may be the wiser choice. If you can’t make payments, or you need to relocate right away and can’t buy a new house until you sell the current one, waiting to sell is usually a losing proposition.
2. Take a hard look at the costs of waiting. You often can cut your overall housing costs significantly by biting the bullet and selling, rather than paying for two homes until you get the price you want. In addition to mortgage payments, add up expenses like property taxes, maintenance, utilities, and commuting costs.
Example:
For example, suppose you paid $400,000 for a house that’s worth $300,000 in the current market. Selling it now would mean a loss of $100,000, but holding onto it costs $3000 a month. Suppose the market improves by 33% in three years, which of course is not something you can count on. You sell the house then for $400,000. In the meantime, keeping it has cost you $108,000. If you keep the house on the market for a year, then give up and sell at $300,000, you’ve added $10,800 to the original $100,000 loss. You’re often better off to cut your losses and sell.
3. Grit your teeth, hold your nose, and be realistic about the market value of the home you are selling. Your original purchase price has NOTHING to do with current reality. The market is the market, and buyers couldn’t care less about what you paid for the home. They only care about the competition and getting the most home for their money, just as you did when you bought the property.
You need to research the housing market in your area or hire competent help (like an appraiser) to help you determine the market value of your property. Real estate agents can help with pricing, but you must proceed carefully. Some agents practice a technique of “tell them what they want to hear, get the house listed, and then work on getting them to reduce the price.”
4. Think like a buyer as well as a seller. Many sellers forget that the pain of selling at a loss is eased if the replacement home they buy is also valued less than it was several years ago. The loss in the home being sold can often be offset by the bargain price of the home being purchased.
5. Do your best to negotiate with your lender. If your mortgage is more than the sale price of the house, you’ll owe money to the lender at closing. Depending on the circumstances, it may be possible to get the lender to accept a lower payoff. Before the closing date, find out exactly how much you’ll need to pay and know where you’re going to get it.
Assessment
Our reluctance to sell a property for less than the amount we’ve put into it is described as “sunk cost fallacy.” Holding on until we get our money back sometimes works. More often, though, all it does is sink us deeper into a financial hole.
Conclusion
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Medical Risk Management: http://www.jbpub.com/catalog/9780763733421
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Physician Advisors: www.CertifiedMedicalPlanner.org
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Filed under: Career Development, iMBA, Inc., LifeStyle, Mortgage Electronic Registry System | Tagged: home selling, house market, mortgages, real-estate, rick kahler, Rick Kahler CFP® | 1 Comment »
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