In our weekly office meeting our manager Rachel mentioned the same thing I have been saying in the past. And I think many real estate agents fail to make this point. Many sellers say they want to wait until the market improves so they can get better prices for their homes. Now, this may be necessary if you bought your home during the boom and it is now worth less than you paid for it. You may have no other choice but to wait for a couple of years to sell in order to get your money back. If you are forced to sell now for some reason, you will have to either take the loss or if you are in a bad financial state you may have to do a short-sale or endure a foreclosure.
However, if you have owned your home for several years, you will normally make money when you sell today. As much as you would of two years ago? Perhaps not. But keep the following things in mind that will make selling now perhaps a better scenario than it will be if you wait. Our manager said that it would "be a wash" or things would even out. But in reality, you may actually be even better off by making that move now. Here is why:
- If your home is now worth 20% less in your market area than it was 2 years ago, then the home you are going to buy is likely to be worth 20% less than was back then. This is the "wash" my manager was speaking of. You make less for your house, but pay less for the next one. If you wait for yours to go back up 20%, then it is likely the other house will also go up 20%, or there abouts. Many NEW homes in the Zephyrhills and Pasco County areas of Florida are selling for less than $100/square foot and that is where prices were before the boom. Do you really want to wait for them to go back up to $150/square foot again?? You do the math!
- If you buy your next home while prices are lower, then your monthly payments will be less. This is partly due to the fact that you will be paying a lower price, but also because at the moment interest rates are still historically low.
- Closing costs on the sale of your current home and the purchase of the new home will probably be less. Many of these costs are either tied to the purchase price or the amount of mortgages. When these are lower, then the cost of title insurance, taxes on deeds, stamps on loans, intangible taxes, and real estate commissions will be lower as well.
- Buying a home at a lower price will also mean that the bank will require less insurance coverage so your premiums will be lower. Insuring a $200,000 home instead of a $250,000 home can mean more money in your pocket each year.
- Not only will your insurance be less, but your county property appraiser will likely look at the purchase price of the home you buy and may give it a lower assessment. This means your property taxes will be less on a home bought now rather than later. Do you want your taxes calculated using $200K or $250K? The savings could be substantial.
- If you are in a state that protects you from rising property assessments, as Florida does, it is much better to start with a lower assessment. Here our homes' values, for property tax purposes, can only increase 3% per year. I would much rather my home start out at $200,000 and go up 3% per year than to start at $250,000 and then go up 3% per year. I know that some other states have similar limitations on assessment increases. Check with your local property appraiser to find out for sure.
So take a few minutes to do some calculations and see if now might not be a better time to sell and buy than it will be in a few years when the market goes back up. You may find that a move today could be a better economic decision than a move in the future. Certainly something worth pondering.
If you have any questions or need more information about this topic, or real estate in general, please feel free to call me at: 813-783-4444 or e-mail me at: jelwell1@tampabay.rr.com
I also invite you to visit my website where I think you will find a lot of useful information. To get there just click on the following link: http://www.jelwell.century21bnr.com/
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