News and Media

May 09, 2017

How could a drop in my homes value effect my selling decision?

For this article we will take an assumption that the value of property in our market is dropping by around 5% (even though its a bit early to make that call yet).

So we ofter hear people saying: “My home was worth $2m last month and with prices dropping to $1.9m there is no way I’m selling now”.

OK and sounds on the surface logical. But is it?

If the property market has dropped 5% then as long as the seller is going to buy again in the same market then whatever they buy should have dropped by a similar percentage.

So the change over price will actually be lower than if they sold when prices were higher.

Stamp duty is based on the sale price so is also reduced. Agent fees are based on the sale price so again they will be lower. And the difference in numbers between the sold and bought properties will reduce.

So all in all there is the potential of saving money in a falling market.

 

Example 1 – sale in top market

Sale price $2m

Selling costs $50.000

Nett $1.95m

Buy property $2m

Stamp duty $95,490

Nett $2,095,490

Change over cost $145,490

 

Example 2 – sale at 5%off top market

Sale price $1.9m

Selling costs $49.000

Nett $1.851m

Buy property $1.9m

Stamp duty $89,990

Nett $1,989,990

Change over cost $138,990

So that equates to a $6,500 saving in a lower market. (Five nights for two in Hawaii flying Qantas coach class but staying at the Outrigger Reef on Waikiki Beach).

If you are selling to cash in on your asset and not re-buying then the above does not always apply but waiting for an upward movement in prices before selling may well cost more due to lost time and other missed opportunities.

Food for thought and we would be interested to get your thoughts on the above.