Taking Advantage of a Buyer’s Market

OK. You’ve heard the news. It’s a Buyer’s Market. That, of course, is good for buyers, but what if you’ve got a home to sell before you get onto the buyer’s side of the equation? Do you try to wait out the "slump" before you sell?

The ideal scenario is to sell in a Seller’s Market and buy in a Buyer’s Market. But, considering the fact that it is usually a gradual shift from one market to another, it’s rare that anyone gets to experience that (unless you’re like my in-laws who moved from Seattle to Michigan at just the right time).

If you’re going to stay in the same area, it doesn’t make much sense to wait until it’s a Seller’s Market again. First of all, no one really knows how long it will take to get there. But, even if we knew it was only going to be a few months, what about buying your next place? In a Seller’s Market you’re going to pay more.

LET’S GET REAL, HERE

So, if it doesn’t make sense to wait and you don’t want to be carrying two mortgages indefinitely, what do you do? How about sharing the wealth? If you know that you can get a "steal" on a beautiful home that you’ve been eyeing for years, or, if your family is quickly outgrowing your current home, why wait until you can’t afford to buy?

A big part of the problem is that, during a Seller’s Market, homeowners forget that the "home appreciation ride" is a roller coaster and not a space flight. What goes up must come down. If your neighbors bought their homes at the same time you did and sold them for 50% more than they paid for them, you probably expected to sell for 50% more also. It’s a natural expectation. Get over it. The roller coaster just passed a big peak.

The good news is, with some careful planning, a couple of good real estate agents (one for selling and one for buying) and a little bit of luck, you can more than make up for the loss on the selling side with a better home at a good price. The trick is, don’t get greedy.

SHARE THE WEALTH

Here’s an example: You bought a home for $150,000 five years ago. Two years ago, you re-financed and it appraised at $230,000. Meanwhile, your family has grown and your house has shrunk. Your making a little more money and there's a real nice house up the hill with a fourth bedroom and indoor plumbing and the roof doesn’t leak. It had been listed for $369,900 and it was worth every penny but, now it’s down to $309,000!

The wrinkle is you have another neighbor who has been trying to sell her house for 6 months. It’s got the same floor plan as yours and the same single pane windows. She’s asking $230,000, the same amount that yours appraised at two-years ago. You had figured that it should be worth closer to $250,000 by now, just like yours. It should have sold in a heartbeat. If she winds up selling for $210,000, you’d have to do the same. You would "lose" $40,000! But, wait a minute. You were indulging in wishful thinking. You forgot about the roller coaster; an understandable, human thing to do; but a mistake, nonetheless.

THE GLASS IS HALF FULL

Again, there is a bright side. If you sell your house for $210,000 (a $60,000 profit!) and buy the house up the hill for $300,000 (a $70,000 savings) you’ve just gotten a bigger, better house with a good roof and indoor plumbing while saving $20,000 more than you "lost" on the selling side. If it was still a Seller’s Market, you would pay more on the buying side than you would gain on the selling. So don’t rule out buying that new dream house!