Many homeowners remember the year 2008 when their homes reached values they had not seen before. They were proud seeing how much their homes had gone up in value from the moment they bought it. It was time to sell, but they wanted to wait a little bit longer … what if the prices keep going up?
Many people just waited too long. The real estate market crashed and there they were with their property values dropping in front of their eyes, and they could do nothing about it. I visit some homeowners who are still talking about how much their home was worth in 2006, and they did not sell. They waited too long. The problem today is that we already reached the prices we saw before the crash and guess what? many homeowners are still waiting because … what if the values go up a little bit more?
But no every homeowner is holding his home from putting on the market because they are waiting for the prices to go up a little bit more, no … many of them do not sell because what can they buy after they sell? they want to sell high, but they do not want to buy high. This is where most American families are:
In order to buy they need to sell
Most homeowners need to sell and use the money from the sale to buy another home. The challenge is that if they sell their home first, where will they go? The market is hot and several offers are being presented on homes, buyers are getting desperate to buy something before the prices going up more and the inventory is low, there are more buyers than homes for sale. Are they going to be able to time the sale of their home with the purchase of a new one? will they be homeless for a while? let’s explore the pros and cons of the different options a home seller has today.
Option No. 1: Make the sale of his home contingent to him finding a new one. This is the worst case scenario. Buyers also have deadlines on their leases or they should be trying to sell their homes themselves. If they do not know when they can close a transaction for sure, they may decide to buy a home where there are not any contingencies.
Option No. 2: Selling the home and renting for a while. This is a good option and again, the homeowner will have two challenges. First, the prices could keep going up, and at the time he is ready to buy, he could be buying higher than he could have bought in the beginning. Second, prices could go down, and this is the perfect scenario for a home buyer, this is the dream come true, where you sell high and buy low. Third, the prices could just stay stable, which is perfect because the pressure of buying fast will go away. Selling your home and going to a temporary home could be an advantage because the pressure caused by having to buy in a limited period of time could lead to making mistakes in such an important investment. Everybody knows that buying a home is one of the biggest investments an American family will make in their lifetime. Since the pressure is off, the buyer will be able to look until he finds the place he really wants.
Americans are known for being a society that does not save. It is a society where being in debt seems to be normal and they have accepted that they ALWAYS will have a mortgage payment and a car payment. Since they have accepted this idea, 98% of Americans have a mortgage payment and a car payment until they die. What I am trying to say here is that if you decide to go to a temporary home until you find your dream home, you have to have made the strong decision of not using the money that you received from the sale of your home to go on vacation, dining out with your family, buy entertainment, buy a new car, etc. A budget should be created and the money coming from the sale of your home should be put in a special account where it will be accessed just when is time to buy your new home. The rent of your new place, if you have to pay rent, should come from the household monthly income. It should be treated like making your old mortgage payment, I am sure you were not using your savings to make your mortgage payment before, so why do it now?
Coming back to the title of my article, selling high and buying low is possible, but it requires a lot of knowledge on the real estate market and taking a little bit of a risk if you want to wait and hope that the housing prices decline while you are renting after selling your home. It pays off to be patient, but if you cannot wait or you just do not want to wait, buy something that you can afford. Buy a home that you will be comfortable paying if something happens in your family, like loss of income, the death of your life partner, etc. Plan for the future, nothing lasts forever and life changes every day. Measure your risk and make your decisions based on this. Do you need a bigger down payment? Is it necessary to save a little bit more money for a bigger down payment before you buy? if you have not saved in years, do not fool yourself. You have to make a commitment to be serious about the finances of your home if you want to achieve the financial goals that will take you and your family to achieve your goals.
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