The move up buyer is well served by this market.
Here is my explanation:
If the prices are down 20% and your client is selling a $100,000 home and buying a $300,000 home, your buyer would be well advised to sell NOW. Here is why:
That $100,000 home at 20% off is $80,000. The client loses $20,000.
That $300,000 home at 20% off is $240,000. The client MAKES $60,000
The $60,000 that he makes by buying in this market minus the $20,000 that he loses by selling in this market is $40,000. Your client is now $40,000 richer by selling and buying in this market. Not too shabby...
Once you attract your clients' attention to this, you'll have their full cooperation. People have myopic vision. They can only focus on what they lose. Counting pennies is never the smart way to go... You have to look at the whole trajectory to understand the opportunity extant in this remarkable market!
5 comments • Myrtle Beach Real Estate by Mirela Monte • October 30 2008 09:10PM
What's your opinion about this? Do you ever attract your client's attention to this fact?
In a Vacuum, with many assumptions this is true. Must take into account Realtor Fees, Taxes, Lending fee's, closing costsm, and oppurtunity costs. If sellers have equity, then there is no better time to buy. Why not buy a new home, and rent the cheaper one? When the mkt turns you can sell the "cheaper" one and reap the tax benefits.
Agree with your point, it is a different and dynamic way to look at the mkt.
I understand the arguement you are making. I agree that if a seller is selling in a down market, but also buying they will be able to take advantage of same forces that hurt them when the were on the sell side.
I think it depends because each market segment gets effected differently. If they are buying a bigger house that has less demand they might get a better price, but the opposite might occur.
In New York, bigger apartments are more desired, two bedroom two bath apartments, or three bedroom apartments are more desirable than one bedrooms. The prices for that type of apartment have held up better than studio or one bedrooms. These different market segments really have an affect.
Hi Mirela,
I agree with the concept in general. It's definitely worth doing the exercise with one's client. But it really depends on the local market, not just the national or regional label of a down market, as you know.
In our area, there are so many micro-markets that it would depend on which area the house is being sold in and which area the new purchase is in. Out of area buyers and sellers for our market, San Mateo County, CA, will not find statistically valid numbers in citywide or county wide numbers for this type of move.
Also, when looking at complex strategies like this, I encourage my client to get their team involved so everyone is on the same page with their goals - Realtor, Mortgage, Tax & Financial planner, Lawyer if necessary.
Marian
I agree with part of your statement. It is a good, no, it is a GREAT time for anyone with good credit to buy. Excellent selection in all price points, sellers cutting deals, and plenty of financing available if you have good credit. The people who bought from me the last time we had a market like this thought I was a genius and people who are buying now are going to love me in down the road when this market turns. Buy now. Buy everything you can lay your hands on and comfortably carry.