SELLING AND BUYING SIMULTANEOUSLY

By
Mortgage and Lending with Augusta Financial, Inc. NMLS ID: 241368

I have been approached my many people recently for advice on whether or not to wait for the market to "bottom out" before they buy their next house.  These clients wonder if it would be more beneficial to move now or to wait for a better (different) market.

These questions can only be answered by looking at what each client is trying to do.  For example, if you are moving up to a bigger and/or more expensive home, it may be in your best interest to sell your home and buy your new home while the market is adjusting downward.

In order to explain why this is, please see the following chart:

Value of Current Home

$300,000

 

Value of Future Home

$500,000

Market Decline

15%

 

Market Decline

15%

New Value of Home

$255,000

 

New Value of Future Home

$425,000

Equity Loss

$45,000

 

Savings

$75,000

 

 

 

 

 

Savings - Equity Loss = $30,000 Net Gain!

The opposite is true if you are downsizing to a less expensive home.  The following chart will explain why:

Value of Current Home

$600,000

 

Value of Future Home

$300,000

Market Decline

15%

 

Market Decline

15%

New Value of Home

$510,000

 

New Value of Future Home

$255,000

Equity Loss

$90,000

 

Savings

$45,000

 

 

 

 

 

Savings - Equity Loss = $45,000 Net Loss!

Taking no other factors into consideration (such as work relocation, family emergency, etc.), the above charts can be summed up in the following way:

        • Move up when the market is declining.
        • Move down when the market is rising.

The above explanation is in no way intended to be a complete guide to buying and selling simultaneously. 

For further information please feel free to contact me.

For more information and FREE MORTGAGE ADVICE visit: http://www.intuitiveloans.com/index.htm

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Rainer
40,193
Chelle Gassan
RE/MAX Regency and Staged Homes VA - Bristow, VA
NOVA Realtor and Stager
That was a really great way to explain both situations.  I keep telling sellers that they will make up their loss on the buy side, but maybe I should put it on paper.
Jan 13, 2008 06:49 AM #1
Rainmaker
189,536
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland
Great demonstration. The answer to the question of when to purchase, is that it is never the best time to wait till the market hits bottom. By the time you react it will already be in an upswing. Past history shows that when the market starts to go up it does so like a fast moving freight train.
Jan 13, 2008 07:06 AM #2
Rainer
225,150
Find a Notary Public needAnotary
QEC Internet Services - Long Beach, CA

You have to work out the numbers.  Your assumptions are critical.  If your assumption are faulty, your analysis will be unreliable.

Jun 05, 2008 05:41 PM #3
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