One of the most commonly asked questions to a real estate agent is when is a good time to buy or sell?
The answer to this question depends greatly on personal circumstances. Is it a financial decision (gain or loss)? Need a bigger or smaller home to live in or start an investment portfolio?
The reasons are as many as they are varied.
Let’s examine some of the common actions sellers and buyers take, starting with investments.
The biggest mistake most investors seem to make is they do what everyone else is doing. This is seen in property and stocks all the time. Investors will start buying when everyone else is buying, usually when prices are high and on the rise. And then they sell, when everyone else is selling. Prices are often falling or are already down. Astute investors are often the ones doing the opposite to everyone else. They are making the most of a depressed market and buying when there are few buyers around, putting themselves in a strong negotiating position. When the astute investor needs to sell, they wait until there is plenty of demand, forcing prices up. Homeowners common actions are similar. Most home owners given the choice, would take the opportunity to make a move to a bigger or smaller home, or maybe a more desirable area. The reason most homeowners don’t make this move is often financial. This inhibits them from moving to where they would prefer to live. However, the most common excuse heard from a home owner is ‘we want to wait until the market improves’. The biggest problem this statement poses is that this excuse will more often than not make the home owner worse off if they do wait for a better market.
Lets say you are upgrading to a more expensive home – selling at $400,000 and buying a $600,000. You wait for the market to improve and eventually it improves 10%. Your home is now worth $440,000 and the one you are buying is now worth $660,000. The problem here is your change over price has just gone from $200,000 to $220,000 – a loss of $20,000, all because of waiting for a better market. The other problem with better markets is more buyers are looking, putting more pressure for you to act quickly. Sure you might sell a bit quicker to start with but you will be under a lot more pressure to find the right home in time.
By selling in a falling or stable market, providing you don’t make the mistake of buying before you sell, there is more choice of homes to buy with a lot less competition and pressure. The biggest thing to remember is to focus on your change over price – not your selling price. Waiting for the market to improve seems to be the biggest contributor to home owners delaying a move to where they really want to live. All because focus is on the money they get for their home, not where they want to go. It’s funny how we’ll pay a lot more as long as we feel we are not losing a dollar on our own home. Another way to look at it is this. Why don’t you wait for the price to go up in the home you want to live in, not the one you don’t. At the end of the day whether you are an investor or a homeowner when is the best time to make your move?
You make the decision.