It’s not a bad time to be a first-time home buyer. Interest rates are relatively low, and in many places, so are home prices.
Of course, it may not so great to be a home owner if you’re trying to sell your home. Even with the recovery in the real estate market, many homes are taking far longer to sell than their owners might like.
Why? Some people are reluctant to sell their homes for less than they paid for them. “I just want to get back what I put into it,” they say.
But there’s no guarantee they’ll ever get back what they put into it. In the meantime, they’re stuck with a house they don’t want.
Maybe it isn’t worth as much as it used to be. But keeping it can be more costly than selling it at a loss, especially if they’ve already bought a new home. There are still property taxes on the old place, utilities, insurance (which may be higher now that the home is vacant), and of course, the mortgage. The house will continue to require maintenance, and because it’s empty, it may attract vandals and need expensive repair. It may be years before the house actually sells—one couple had their Cleveland-area house on the market for about two years, and that was before the recession.
And of course, there’s also the opportunity cost. Every day you haven’t sold is a day you can’t use the proceeds of sale for a better purpose.
So what’s a home seller to do? Often the best move is to price your home aggressively. That means low. Since the costs of owning the old house can add up fast, time is probably of the essence. If you want to sell that house quickly, you’ll need to price it to compete against others who are trying to sell their houses quickly, too. Remember, the sooner you sell, the sooner you’re free of all those ongoing expenses and risks.
Like the stock market, the real estate market is unpredictable. But unlike the stock market, it’s very difficult to tell from day to day—or sometimes from month to month—whether prices are going up or going down. We can never know for sure whether we got the best deal on the house we bought, or the best return out of the one we’re selling. But we can know for sure is that we won’t have to pay all those ongoing expenses. Quickly selling the house we no longer want is, for many of us, the best financial strategy.