Upgrading in a Down Market
The currency symbols may need to be changed but the principle's the same!
Andre de Villiers (South Africa) Blog - Sunday 13 July 2008
We are all familiar with the saying, "A rising tide lifts all boats" and the truth is the reverse applies just as well.
Sellers in a depressed market can be left with little comfort and it's hard to find a silver lining for a financially stressed seller who is selling and downgrading but this does not apply to the seller that plans to upgrade.
For those who can afford it, it could never be a better time to upgrade and it's simple maths but most sellers don't see the advantage to them when they buy because they are so intimately involved with what they have to sell to move on they can't see beyond the emotion of their selling price.
The agent needs to spell out that selling in a strong buyers market has many opportunities to the upgrading buyer. Let's take a simple scenario of a seller who is selling for R1 000 000 and buying for R1 750 000 and let's say the estimation is that prices are 15% down on what they were, then the R1 000 000 house will sell for R850 000 (a loss of R150 000 to the seller) but as the R1 750 000 house is going to sell for R1 487 500 (down R262 500) the upgrading buyer scores a R112 500 - 'thank you very much!'
The key to this is obviously for the seller to put himself into the strongest negotiating position he can, and that is a cash buyer needing a modest mortgage finance. You are not in a strong position if you are still trying to buy up with a 'subject to sale' contingency!
Increasingly we see sellers who missing the boat and the opportunity to move onwards and upwards because they are so fixated with not selling below a increasingly mythical target!
While we accept that the price of oil, gold and equities rise and fall we tend to fight so much harder against the reality of the real estate market's moves. With all the readily accessible data available to home sellers (and buyers for that matter) the obstinate resistance to new pricing does not make sense but it's the confusion between there value of the property and the value of the home. Get the seller to separate them more clearly in his mind and realise the home goers with them and we are 90% of the way to letting go of the emotional obstacles to more realistic pricing.
Comments(0)