Movin’ On Up in Livermore, CA – How the Spread Works for You

Real Estate Agent with Coldwell Banker Residential Brokerage BRE#01732313

Man with Big MoneyShould you wait until the market rebounds to sell your home? It really depends upon your ultimate goals of course, but if you’re at a stage where you need a larger home, then read on.

This week at our local marketing meeting we had a Mid Year Market Review. One of the broker panelists talked about this being one of the best move-up markets EVER! Let’s talk more about that. What makes it so?

Low, low prices! Very few areas of the country have been immune to the decline in values. And for many areas (especially those with the first and steepest declines), have stabilized and even ticked up slightly during the spring selling season while anxious buyers worked to comply with the First Time Home Buyer’s credit.

Low, low interest rates! There was rumor that interest rates would tick back up after the first quarter of the year, and that has not come about. Instead, we’ve seen rates dip, to unbelievable levels.

Do the math. Low prices and low interest rates in turn bring lower rates on insurance premiums and lower property taxes. When those variables are combined, you have two possible outcomes – either a lower total monthly mortgage payment, or more buying power.

So let’s say that in your location, home prices have declined an average of 25% over the past several years. Back then your house would have been worth $400,000. Let’s use a factor of 7.5% just for example’s sake for commissions plus other costs of selling. And on the purchase side, we’ll use a 2% factor for closing costs.

Your Current Home Then                                   Your Home Value Now

$400,000                                                  $300,000
-30,000 less costs to sell                                -22,500 less costs to sell 
370,000 net proceeds                                    277,500 net proceeds  

Your Move-Up Home Then                                 Your Move-Up Home Now

$800000                                                   $600,000
16,000 closing costs                                       12,000 closing costs
816,000 total cost then                                  612,000 total costs now

The two columns below really illustrate the power of the spread. This is the difference between what the cost of selling and purchasing was at the market peak, compared to what it could be now. The spread really works in your favor in this type of market.

Your Net Then                                                        Your Net Now
$816,000 move-up sales price then                 $612,000 move-up sales price now
370,000 cash from sale of home                      277,500 cash from sale of home
446000 net cost of move-up home then             344,500 net cost of move-up home now


$446,000 net cost of move-up home then
344,500 net cost of move-up home now
101,500 less today

That larger house cost you $101,500 less today than it would have before. Not only that, but the cost of owning that home is less over time, considering you can lock in a 30-year fixed rate loan at exceptionally low rates and count on that payment staying at an affordable level. And an added bonus? You’re paying property taxes bases on that lower rate. So if you’re toying with the idea of a larger home, maybe it’s time to run the numbers. Arming yourself with what-if scenarios can help you map out your future, and lay a plan out for success.


Re-Blogged 9 times:

Re-Blogged By Re-Blogged At
  1. Harry F. D'Elia 07/24/2010 01:20 AM
  2. Susan Morrison 07/24/2010 01:29 AM
  3. Steve and Jan Bachman 07/24/2010 01:56 AM
  4. Will Nesbitt 07/24/2010 03:18 AM
  5. Yvette Chisholm 07/24/2010 04:19 AM
  6. Dan and Amy Schuman 07/24/2010 04:20 AM
  7. Nancy Milton Holtzscher 07/24/2010 03:54 PM
  8. Maya Thomas LLC, Broker 07/25/2010 07:29 AM
  9. 07/31/2010 02:19 PM
  10. Betty Knowles 07/31/2010 02:53 PM
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Ron Parise - Cape Coral, FL

I talk to people all the time that need to sell a home up north to relocate in Florida. Even when I show them the math they wont budge...They just cant stomach taking a "loss"  on the first half of the deal.

I dont get it, but my wife is quick to point out that emotions are powerful things and it's emotion that drives folks to buy or sell

People make an emotional decision to buy a home, then they justify it with the numbers. As powerful as your numbers are no one will listen until they have already made their decision (or unless they are a lot like me and operate with their emotions tucked away in their back pocket)

Jul 24, 2010 12:20 AM #4
Kathryn Maguire (757) 560-0881 - Chesapeake, VA
Serving Chesapeake, Norfolk, VA Beach

I have presented this scenario so many times and it is amazing that people are still scared.  It IS a great time to buy that move-up home!  You put it very succinctly.  (And where did you get the cool graphic? I just loved that one!)

Jul 24, 2010 12:26 AM #5
Peggy James
EXIT Realty Associates - Woodbridge, VA
Woodbridge Virginia Area Real Estate Specialist

Karen great post. I've been working real estate for over twenty years in total and I have never seen a better time for move-up buyers.  Luxury Homes that" move-up buyers" could only dream about just five years ago on the radar screen. The low interest rates, allow for much more buying power! Now, in our area of Prince William County Virginia and Northern Virginia those move-up buyerswho have VA Eligibility, VA allows loans up to $729,750! That is still a no money down program! It is possible for some move-up buyers who have equity to bank their current equity. Low Interest Rates..Low Prices..No Money Down. It's a win/win

Jul 24, 2010 12:35 AM #6
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Karen, the facts speak for themselves. Good job and a great way to explain it to potential sellers.

Jul 24, 2010 01:42 AM #7
Karen Crowson
Coldwell Banker Residential Brokerage - Rancho Bernardo, CA
Your Agent for Change

Sarah, #3.  I'm sure you're right, especially if some are saying it makes sense across the board.  It's a different scenario for the downsizing seller, but the incredible interest rates available now can often make that case appealing over the long term.

Claudia, #4.  We don't have the 'high inventory' component that you mention in this area, but inventory levels do increase at the very high end of our market.

Ron #5. I have to agree with you there.

Kathryn, #6. It's from

Peggy #7.  The no money down part would be a tough presentation for me.  I think that's why some people are ok with the 'strategic defaults'.  They had no vested interest to begin with.

Michael #8. Thank you!

Jul 24, 2010 02:25 AM #8
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Hey I wonder if I'll get 10 spam reporting points for reporting #2 !!!*L*    

If you are moving up , NOW IS THE TIME !!!!!!!!!!!!!!!!!!!!!

Jul 24, 2010 02:28 AM #9
Karen Crowson
Coldwell Banker Residential Brokerage - Rancho Bernardo, CA
Your Agent for Change

Michael #10.  Already did that!

Jul 24, 2010 02:35 AM #10
Stephanie Arnett
RE/MAX Partners~ Starkville, MS - Starkville, MS
SRS, IMSD, Broker Associate, REALTOR

Such a WONDERFUL post!!

Jul 24, 2010 02:41 AM #11
Bob Willis
Berkshire Hathaway HomeServices California Properties - Orange, CA
Orange County & L.A. County Real Estate Agent

Great explanation of the spread.  You can easily make the comparison of today's prices and interest rates with those of the future by switching your columns.  Column A could become Your Home Value Now, and column B could be Your Future Home Value (or cost).

Jul 24, 2010 03:47 AM #12
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

Karen - an excellent overview of the power of the spread and the tremendous opportunity that exists today for many sellers who want to move up. You can't argue with the data. The emotions of taking a hit on a home are hard toovercome despite being able to buy for less. AN illustration such as this sure helps.


Jul 24, 2010 03:55 AM #13
Patricia Aulson
Realtor - Portsmouth NH Homes-Hampton NH Homes

Great post today, thanks for getting this out to us today.  It would be good for people to read this, i think I'll re-blog it.


Jul 24, 2010 04:15 AM #14
Dan and Amy Schuman
Howard Hanna Real Estate Services - Solon, OH
Luxury Home Specialists

Karen, the numbers really show how good this market is for buyers. We often try to illustrate this point to our move-up buyers as well and the ones who are analytical totally understand the benefits. Logically, it makes sense to buy now, but I think it often comes down to the buyers comfort level in their job and confidence they can sell their existing home. Thanks for the post.

Jul 24, 2010 04:15 AM #15
Bill Burchard
3B Realty: 951-347-3818, CA - Murrieta, CA
Broker, Realtor, Representing Buyers and Sellers

Excellent, clear explanation, Karen. A few months ago I presented a similar eye-opening argument to my prospective sellers. They were unhappy that their home was worth half of its peak value, down to $200,000 from $400,000. They paid $100,000 for the home many years ago and were sitting on $300,000 of equity at the market's highs. They had planned to sell their home and use the large equity to trade-up to their $800,000 dream home. Now they only had $100,000 equity. They were depressed... until I helped them realize that while their home had lost $200,000 in value, their $800,000 dream home was also worth half of its peak value... and was now selling for $400,000. So instead of buying their dream home at the peak with a $500,000 mortgage, they could now buy their dream home and have a $300,000 mortgage... with a 40% lower monthly payment. When they looked at their lost equity from this perspective, they realized that it was a great time to sell and trade-up... and they did. Last month, they closed escrow on their dream home (a short sale) for $350,000.

Jul 24, 2010 04:17 AM #16
Yvette Chisholm
Long & Foster Real Estate, Inc. - Rockville, MD
Associate Broker - Rockville, MD 301-758-9500

Karen, congratulations on the featured post!  It is a great explanation and definitely worth a reblog...thanks for posting this well written piece..and thanks for your recommendation of my article.

Jul 24, 2010 04:18 AM #17
Joshua Zargari
MJ Decorators Workshop LI staging and home decorating - Lynbrook, NY
MJ Decorators Workshop

Great post!

Jul 24, 2010 06:25 AM #18
Betsy Schuman Dodek
Washington Fine Properties - Washington DC Area Real Estate - Potomac, MD

Excellent post and example how the market works for todays buyers!!!

Jul 24, 2010 08:29 AM #19
Richard Weeks
Dallas, TX
REALTOR®, Broker

Thanks for getting the word out.  It is a great time to buy and sell.

Jul 24, 2010 11:26 PM #20
Susan Neal
RE/MAX Gold, Fair Oaks - Fair Oaks, CA
Fair Oaks CA & Sacramento Area Real Estate Broker

Hi Karen - Great job!  This is what I've been telling my sellers for some time, but I never actually worked out the math for them.  I have simply tried to explain that they may be selling for less than they expected, but they will be buying their next home at a bargain price too, and probably at a lower interest rate than they have had. This really spells it out.

Jul 25, 2010 11:01 AM #21
Karen Crowson
Coldwell Banker Residential Brokerage - Rancho Bernardo, CA
Your Agent for Change

Bob #13, that's a good idea.

Jeff #14.  That's it.  The numbers are helpful in illustrating the point, but emotions typically standing in the way of a pragmatic decision.

Bill #17. I'll bet they're glad about it now!

I'm glad some of you felt it worth a re-blog. Thanks!

Jul 26, 2010 04:29 AM #22
Ken Barker Realtor® GRI, E-Pro Certified
Dilbeck Real Estate - Burbank, CA

Karen - My favorite statement right now, when I run across someone that is waiting it out to see if the market is going up and the client needs to sell before  buying. "sell low but buy low". With interest rates at an all time low they would be foolish to wait. Great analogy and illustration.

Jul 26, 2010 05:47 PM #23
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Karen Crowson

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