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Thursday, May 19, 2011

Lost Equity? Maybe not.

The most frequent thing I hear from people who want to move is that they are afraid if they sell their home before the market returns they will lose money.  They want to wait until their equity position returns to what it once was.  Let me explain how this is a false view.

While it is true, we have all lost in home values over recent years, recovery doesn't necessarily need to take place in the home in which you are currently residing.  If you have enough equity in your home to sell and at least break even, now is a great time to take advantage of the buyer's market we are in to purchase a bigger or nicer home than you currently own, which is often more than what the previous market would allow you to afford, and wait for the market to recover there.

As an example, my husband and I just bought a house.  We sold our old house for about $6,000 to $10,000 less than what it would have gone for before the market turned.  While we did have to bring about $2,000 to the closing table, we really didn't feel too badly about it.  We had refinanced some debt into the second mortgage and, for several years, were writing off interest on debt we otherwise would not have been able to write off.  I looked at it as having to pay off a credit card to qualify for a new home.  No big deal if you can afford it.

We bought the new house for about $20,000 less than what we would have paid for it six years ago.  When the market recovers, we will see an increase in the new property value just the same as we would have if we would have waited for the market to return at the old house.  But because we bought now, we were able to purchase a home that we would not have been otherwise able to afford, moved to a better neighborhood, improved the quality of our lives and are no longer tripping over our dogs.

Yes, property values are lower than they have ever been.  Take advantage of this and improve your living circumstances.  Waiting for the market to return just may put your dream home out of reach.