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When is the Perfect Time to Sell?

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Real Estate Agent with OC Signature Properties

When is the Perfect time to Sell?

By Ron Accornero

Money House 

The kids are grown and gone and there are other things you like to do now, like travel and see the world.  You really don't have a need for a large home anymore, but the mortgage payment is low, so you haven't thought about selling just yet.

 

If you have been living in your home for 20 years or more you probably have substantial equity built up.  All that equity is just sitting there and is not earning interest and its only function is keeping your mortgage payment low.

 

When we were young we put a 20% down payment on our home and purchased the home as a place to live and an investment.  The beauty of this was that when our home appreciated 10% we receive the benefit of earning interest on the money we borrowed just like buying stock on margin.  (Do I dare mention margin accounts in times like we recently had?)  The benefit over stock is that if the market goes down, we do not get a margin call.

As we live in the home over 20 years, through appreciation and payoff of the principle the amount we owe becomes very small and the loan is no longer the same great write off that it was when we purchased the home.  There may be two options:  One is to refinance your home to get the equity out and begin making the large payments again and regain the interest rate deduction (Only do this if you have a vehicle to place your money in a secure and profitable investment.) Or the second option is to sell and move down to a smaller home.   The first option gives you the equity but continues with the expense of the large home.  The second option allows you to cut your expenses because of the smaller home and increase your income through investment without working any harder.  This is the time in our lives when we need to take life a little easier without cutting back on our spending habits. When is the perfect time to sell?  It should be to sell when the market is high and buy when the market is low!  Or it may be to sell now and take life a little easier.

 

 We don't often know when the market is at the peak, but we can estimate when we are close to the peak.  The real estate market has been a 10 year cycle.  1980 was a peak in home prices in the Southland and interest rates were at up as high as 20%.  The market then started a decline until 1985 and started a slow rise and peak in 1990.  Again the real estate market declined until 1995 and started to rise again and we thought it peaked in 2000, but because of the generous lenders who gave out loans with low credit scores, no income verification and no verification of deposits, home prices continued to climb right up to 2006. At the beginning of 2007 we knew that the real estate market was in a tail spin and a new term hit our lips. It was called "SHORT SALES".  The short sale market drove down the price of homes.  50% of the homes sold in that period were short sales. Here we are in 2010 and home prices have continued to fall because of the many foreclosed and short sale properties on the market.  How much further will the market fall?  We don't know exactly, but as the inventory remains tight and good homes are hard to find we will start seeing an end to the fall in home prices.  I think we are seeing those signs here in Southern California.  Prices are not falling as much and good properties are hard to find. We are going to see this type of market here in Southern California for the next three years before we see appreciation again.

 

If you have been in your home for 20 years you still have a lot of equity even with the decline in home prices. If you sell in this market and buy another property you will take advantage of your high equity, and buy a smaller home for a lot less money, so you are not losing that much.  You will enjoy appreciation on your smaller home when that happens and pay less in expenses on the smaller residence.

 

If you would like to use your equity and buy down, think about selling in this market rather than waiting for next year when prices may be lower. Buy down and pay off your mortgage and do away with the mortgage payments.  Make life easy and relax. Take a trip to Europe now while it is affordable. Now is the time to do it.

 Call Ron Accornero to get a competitive market analysis on your home and get some great ideas on what to do to get the maximum dollar amount for your home.

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Ron Accornero

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