Want out? Sell at a loss, buy at a discount
So you bought at the peak of the real estate market and now want out; maybe because you bought quickly during the peak due to the mental affect the pace the market was moving at? Or maybe you have detached yourself mentally from your home and see greener pastures for you in another area/home. The problem is, you probably can’t sell your home for what you bought it for. Let’s see what we can do:
You bought a home in an over-speculated area and many of the approved plans never came to development due to the financial crisis. Although a housing recovery is immenent, maybe it will take longer for your home to appreciate because those cancelled “future plans” are no longer in talks.
First, speak to a real estate professional, and find out what your home could sell for. Prepare to price your home aggressively and also prepare for a good amount of time, as much as 6 months….if your home is priced realistically. Homes are selling, but if you are set on moving, you will need to price yourselves with the other comparable homes in your area.
Next, let’s assume that you bought a home for $400,000. If you sell it for a 15% loss, you will have a gross sale price of $340,000. When all is said and done, you will likely lose your 20% down payment you initially invested into the home. Chances are your discount on the next home will over-compensate for your loss you could take on your current home. If you bought before the peak, you may be looking at taking your losses in paper equity and are now forced to sell at a “break even” price. Take into consideration what you will get back at closing of your own funds invested at the time of initial purchase.
There are now a couple of options to look at. On your next home, how do you plan on affording another down payment? Are you aware of the FHA loan products out there? FHA allows borrowers finance homes with as little as 3.5% down. If you are planning on obtaining another conventional loan, prepare to put down 20%. Do you have any non-retirement funds that you can pull cash from? Stocks, bonds, mutual funds? Look at your financial situation, then speak to a qualified loan specialist to weigh both loan types. Believe it or not, home loans are still viable today. It just requires more paperwork, verifications, but rates are still historically low on FHA and conventional financing.
Set a budget for yourself. If you are comfortable with a monthly payment, be sure to shop within your means. If you are shopping for a condo, know that in most areas, New Jersey condos are selling at about 5-10% less than their listing price, so be sure to have a qualified real estate agent assisting in negotiating this for you.
In conclusion, if you had taken a loss of 15% on your previous/current home, be sure to nail down an area that you can vision yourself living in for a longer period of time. If you do not see yourself living in the home for a minimum of 5 years, you may want to re-think relocation. Look for “seasoned” areas where business are alreadyestablished. That is the beauty of northern NJ real estate. Most areas are fully developed and you can make an easier decision on your opinion of the areas’ quality for your standards.
If you are looking to relocate, now may be the perfect opportunity with crazy low rates and home prices. Taking a loss and hoping to buy at a discount is a big step to take, but one I feel comfortable recommending today based on the macro economic structure of todays approach.
For a free consultation on relocation in New Jersey or services to buy/sell your home and how we can benefit you, please contact us.
Popularity: 1% [?]
