To Buy or Not to Buy

Here is an article I found about Buying in a Down Market, I think it gives a different perspective.


By Elizabeth Weintraub

"Everybody wants to know how to best time the marketwhen buying a home. It's just natural. Especially if you're thinking about buying in a down market where homes prices are declining. You wonder how low they will go and whether you should wait, right?


Some Home Buyers Should Buy Immediately

You're probably thinking: "Of course, she would say that. She's a Realtor, and agents always say 'Now is the best time to buy'." Well, here is why:

  • If you are a seller who wants to move up to a more expensive home in a down market, now could be the best time. The longer you wait to sell, the lower the price of your home could fall.
  • If you can arrange for alternate housing, a smart strategy is sell now, wait a few months, then buy your new home.
  • If you sell and buy simultaneously, you'll still be ahead of the game because the price reduction on the purchase is greater than the loss on the sale.


Consider the "Loss" on Selling Your Present Home

For example, say your present house is worth $300,000, but because of high inventory and few buyers, you must reduce your price by 10%. So, instead of receiving $300,000, you would get $270,000 and "lose" $30,000.


Consider Your Real Profit

Now, consider this. Say you bought this home 10 years ago and paid $100,000. You're still ahead $170,000, less costs of sale, aren't you? (This ignores monthly payments, but you would make those if you were renting, too.)


Consider the "Savings" on Buying Your New Home

If you are planning to move up to a $500,000 house, which is located in the same distressed market, you could probably buy that house at that same 10% discount or $450,000. This would mean you had saved $50,000.


Review of Selling and Buying Numbers

  1. So you "lost" $30,000 on the sale of your home
  2. But you "made" $50,000 on the purchase of your new home
  3. Doesn't that put you $20,000 ahead?

A good strategy is to weigh all the pros and cons of real estate ownership before making the decision to buy or sell. Don't panic over newspaper headlines. Make an informed decision. Run your own numbers."

Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.