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When is a Gain a Loss

By
Services for Real Estate Pros with Business Attorney and Success Advisor

From the title, you might think this is a commentary on the differneces between Republicans and Democrats (or Rush Limbaugh and...um...anyone sane and balanced).  I love how they talk about "tax cuts" versus increases in funding that aren't as much as they used to be.  When I was interested in raw politics, I cared...

Anyway, I found it humorous that the headline to this CNN article was "A $200,000 'loss' - and happy with it".  The article talks about Century 21 CEO "losing" $200,000 of home value as the market has softened.  It's idiotic, really, since the real news is that Mr. Kunz bought the home for $340,000 in 1998 and it's now worth $1.1 milllion (down $200k from 2004).

Why do the idiots at CNN headline this as a loss?  If I were to make $700,000 on a transaction, I'd call it a GAIN, not a loss.  If I could have sold it for $1.3M instead of $1.1M, I'd call it a SWEET deal because I still gained $700k (worse case scenario, I'd say "I could have made $900k instead of $700k"...but that's still not a loss).

Perhaps as prices fall from historic highs, we can remind sellers that a "realistic" price is not a loss, it's a GAIN over prices just a few short years ago...and in many areas it's still a sizeable gain!  I guess it's all about perspective.  Is the glass half full?

In case you want to see it (along with a very happy looking Mr. Kunz): http://money.cnn.com/2007/08/27/news/economy/kunz_homesale/index.htm?postversion=2007082715

Anonymous
Blogger To Be Named Later

Jason,

Agreed. The industry is in this mess because of aggressive lending and speculation. Did folks put up additional collateral for refinancings? No, they borrowed against appreciation -- a completely arbitrary measure of worth until the asset is sold. Now that prices are heading south where's the fail safe?

Aug 27, 2007 09:36 AM
#1
Chris and Maria Jeantet
Shasta Living Real Estate - Redding, CA
Top Realtors in Redding CA
Isn't that the truth Jason.  Howeowners just got spoilied when the market was so hot for those 6-7 years that now that things are going back to a more "normal" state - they're freaking out saying they're "loosing" money.  We have a client who worked har all his life, saved everything he could in order to live the dream of being a homeowner, he finally bought his home late last year and is having to sell it due to a relocation move and has to come up w/$15,000 out of pocket, just to get rid of that mortgage and move on with his plans...now that's a "loss"!
Aug 27, 2007 10:01 AM
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

A recent local study had shown valuations at 215% of their 2002 prices.  Now we show close to a 14% decrease for the past year and people are crying foul.  100% profit in 5 years seems pretty good to me. 

Sep 02, 2007 06:31 PM
Jason Romrell
Business Attorney and Success Advisor - Los Angeles, CA

Chris and Maria, that really is a LOSS!

As to Kevin's point...Well said Kevin!

Sep 03, 2007 03:49 AM