Home > Buying a home, Selling a home, Supply and Demand > A Real Estate Carol: Ghosts of Prices Past, Present and Yet May Be!

A Real Estate Carol: Ghosts of Prices Past, Present and Yet May Be!

THE FOLLOWING IS BASICALLY TRUE, EXCEPT FOR THE PART THAT DIDN’T HAPPEN YET

THE NAMES HAVE BEEN CHANGED

THE NUMBERS ARE ALL ACCURATE

REALITY

John and Mary decided in the fall of 2006 to move.  The house they were in was old, and had too many steps for John’s aging knees.  They did some fixin’ up and put the place on the market in early 2007.

One of their neighbors who had a similar house two doors down had sold in the summer of 2006 and received $430K.

Their Realtor told them that prices had dropped a little in their market and they should list it at $425 and be prepared to come down a bit.  Mary and John were concerned by this.  They felt that their house was at least as nice as the neighbor’s and that they did not think they should take “a loss”.

The Realtor, who knew that they had bought the house about 10 years earlier for $325, didn’t seem to agree that if they sold for $420 it should be counted as a loss.  In fact, she said, if you sold for $420, you’d be making a considerable profit.

Mary said “But if we had sold last summer we would have gotten more!”

The Realtor said “But you didn’t sell last summer?”

Mary: “Well, should we wait until prices come back up?”

Realtor: “I can only answer that if you can tell me when they will go up?”

Mary and John:  “HMMMmmmmmm

So Mary and John listed the house for $425 and in about 45 days sold it for $415.

They bought a new house in a different town about 20 miles away.  It was actually a bigger place but because it was a little farther out from the big city, the market was priced lower.  They bought it for $375.

With only a very small mortgage left on their original house, they were able to put $300 down on the new house and mortgage $75

As we move into 2010, home prices have NOT rebounded, in fact, they’ve continued to drop.  The home they bought in 2007 is now valued at $300 based on recent sales in their new neighborhood.

———–

ALTERNATE REALITY

Mary said “But if we had sold last summer we would have gotten more!”

The Realtor said “But you didn’t sell last summer?”

Mary: “Well, should we wait until prices come back up?”

Realtor: “I can only answer that if you can tell me when they will go up?”

Mary and John: “HMMMmmmmmm”

So Mary and John held on to their house, waiting until the market came back.  As of the beginning of 2010 it had not, in fact, prices continued to drop.

In January of 2010 John had had it with the stairs.  He told Mary they needed to sell now – even if they had to give the place away.

So they called their Realtor who, after doing a Market Analysis, told them that their home should bring between $330 and $340.

They listed it at $349 and after 45 days sold it for $340

After looking around they found a new home in another town (the same home in the first part of the story).  They purchased it for $305.

Since they had a very small mortgage on the house they sold, they were able to put $235 down and had a mortgage of $70.

——————————

So – if you put aside unimportant things like sale price and market value – at the end of the day,  in both scenarios John and Mary leveraged the equity in their home to buy another home that they liked better – and they ended up with virtually the same situation – with one exception. In the second scenario, they stayed in the house they didn’t like for three additional years.

WHAT IF…….

The whole thing was just starting now.

  • What if you have a home that no longer fits your needs?
  • What if you decide not to sell it because you are waiting for prices to come back up?
  • What if prices don’t rise, and you stay where you are for years?
  • What if, after that time, you make a move and end up with essentially the same financial situation?

Of course, as in any good space-time continuum story, the future is unwritten. Just ask good old Ebeneezer and he’ll tell you  The Ghost of What Will Be, is actually The Ghost of What MAY Be. Prices could go up or down dramatically in the next three years.

The point, I guess, of my little fable is that if prices go up or down on the house you want to sell, they will likely go up or down proportionately on the house you want to buy – so if you want to make a move, what is it you gain by waiting?

Just some food for thought.

God Bless Us Everyone!

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  1. sandy
    January 22, 2010 at 5:19 pm

    ~so … everything only applies to its own set of circumstances? (…already knew that! lol )
    Love the story, I just need to figure out if there is a way to use it to my advantage in dealing with the owners of the house (they want to sell) where I live!
    Thanks for the break… 🙂

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