Mortgage Broker Tip | Nostalgia Can Cost You

Over the past five to six years many of us have seen our home’s financial worth depreciate in value, and even those who live in San Francisco have felt the adjustment. The housing market has certainly changed from the hay days of the new millennium. Home mortgages
 were available without stated income, and well, that bubble burst. Unfortunately, we who own property still hold on to that dream of buying, selling and making our riches. It can be done, but not as easily as it once was.

For many, a home is a place to live first and foremost, but it is also an investment. They hold on to the fact their property was worth more than it is now. For example, they might have purchased property at $450,000 in 2004 and see it appreciate in value to nearly $600,000 in 2006, and then $850,000 in 2008. Today, that value might have lowered to $650,000. Today’s home sellers are nostalgic about those older prices. They see the $200,000 ‘loss’ instead of the ‘$200,000’ gain.

Think about it. A $200,000 gain.

This is where the mistake comes in to play. The seller wants to hold out; hoping the prices rebound up again, that somehow the housing bubble will re-inflate. What most sellers miss is that the $850,000 price is just a paper gain. They are actually ahead with the selling price of $650,000. Seems like commonsense, but when you’re personally invested in the home it is harder to see this situation for what it is.

If you are a seller, or you know a seller, this ‘hold out’ could be long, expensive and very inconvenient. At one time, homes weren’t staying on the market for very long. Depending on the area, homes could be sold in four weeks, and even less elsewhere. According to Trulia.com the average wait is eight weeks, and nearly a quarter of those had to lower their asking prices to sell.

Think about it. You’ll need to pay the mortgage and upkeep of the home, more so than you probably would. You’ll need to keep the home presentable.

So what do you do?

Ask yourself what the costs are of missing out on other opportunities if you don’t sell now, and what you are paying to hold on to your home in the hopes it will regain that additional $200,000. If the house beats the total then hold on, otherwise cut the ‘loss.’

Remember!

Ask yourself, “If I were buying this house today, what would I honestly pay for it?”