Rick and Nancy Jackson, Edmond and Oklahoma City REALTORS

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From a $10,000 loss to a $40,000 gain

  • How To Turn a $10,000 Loss Into a $40,000 Gain!

         I’m waiting to sell until the market turns around.  That is a common voice heard today among those out there thinking of selling their homes.  You want to get the maximum amount from your home possible and with declining home prices it seems logical to wait until the market is once again a sellers market and your home value goes up.


         I would like to challenge that thinking and take you beyond logic to a new realm of profit and loss.


         Let say that your home was worth $200,000 last year or the year before, but in this current decline it is only worth $190,000.  That would be a $10,000 loss.  Ouch!  What a hit, to loose $10,000 so quickly hurts.


         So the common school of thought would be to wait until the market goes back up, and we all know that it will go back up and then sell your home.  You could expect your home to gain back that $10,000 and maybe even more.  Let’s say that you could wait a year and then your home might be worth $200,000 again or even more, maybe even $215,000.


         When that happens, you will put your home on the market and then you will go purchase a new home, your dream home.  It will be expensive and will have everything you have ever wanted. But after all, you have just sold your old home for a premium price and because you were patient and waited, you were able to make $15,000 more than you would have the previous year.  That is an 13% gain. You are feeling real proud of your business savvy at this point.


         You purchased a $400,000 house, but had $65,000 to put down which gave you a good loan and interest rate.


         Let’s take a look at another scenario.  We can all agree that the home price decline is across the board.  All houses big and small are selling for much less than they were last year or the year before.


         But what I have found is that the larger the home, the slower it is moving and the more drastic the price declines have been.  The homes which are maintaining their value are in the $100,000 and less.  As the price of the home goes up from that point there is a graduated rate of decline.  So a home in the $200,000 range will hold more of its value than a home in the $300,000 range or higher.


         As I said before, your $200,000 home has become worth $190,000 bearing a $10,000 loss in value.  You are looking to buy a home in the $400,000 range which has suffered an even great decline in market value.  It would be safe to say that a home of that size has easily lost $40,000 in value and is now on the market for $360,000.


         Should you wait and purchase that same home when the market rebounds you could pay as much as $420,000.


         So let’s see, if you sell now and take the $10,000 loss on your current home, you will have $55,000 to put down instead of $65,000.  The home you want to purchase is no longer $400,000, but $360,000, a savings of $40,000.  Let’s compare payments below:


         Buying and Selling Now:

    Purchase a home for $360,000 putting $50,000 down.

    Conventional loan at 5.5% interest.

    30 Term

    Payment with taxes and insurance is approximately $2,268.00


         Buying and Selling Later:

    Purchase a home for $420,000 putting $65,000 down.

    Conventional loan at 6.5% interest. (because we know interest rates are rising too.)

    30 Term

    Payment with taxes and insurance is approximately $2,802.00


         By selling your home now and taking a loss you can take advantage of other homes which have taken a loss and turn your $10,000 loss into a $40,000 gain.  Your payments would be approximately $550 less each month and when the market rebounds and property value rise, you will gain instant equity.  You have the choice of buying a much nicer home and a lesser price or waiting and buying less of a home at a much greater price.  I say, buy and sell now, a much smarter move!