Wednesday, September 26, 2007

Part 2 - Practice what you Preach: advising sellers not to sell

I've had three clients in the last week ask me about selling their home. All three were ready to sign a listing contract that day and get their home on the market immediately. Unfortunately (and fortunately), since my goal is to always work for my clients' best interests, I'm not going to list any of the three for sale. Here is my second client's story:

Client #2

Client #2 is a family who is thinking about moving closer to the husband's job. Their understanding is that their neighbor's house recently sold for X amount, so even if they had to price a few thousand dollars less than that, they would still be able to afford a nice home in the neighborhood they've been researching.

I always agree that the market shouldn't influence your decision to make a "lateral move" – if you're going to buy AND sell, you'll get the benefit of the market on one side and work against the market on the other, so it shouldn't play too big a factor. However, they've already been looking at homes in the new neighborhood, and have their heart set on a particular floorplan and price range. What they didn't realize was that their neighbor's house didn't SELL for that amount; it was originally listed for that amount. It actually sold about 5 months later for 15% less than that amount.

My advice: we can still do this, but it's no longer an "even trade". By the time you factor in a lower sales price, some expenses & effort to get your home into selling shape, transaction costs on the sale and the purchase, and other moving expenses, you're going to either have to come out of pocket with the difference or take out a larger mortgage.

If this is ok with you, let's do it. But you first called me with the idea of moving from one house to the next without a change in mortgage – as if it were an even trade. Nuh uh – not gonna happen. There may not be a right & wrong answer, per se, but as long as you know the true story, you're able to make a more informed decision.

Client #2 has decided to hold off for the time being.

- Chris Butterworth

[tags] home selling advice, moving [/tags]