With the economy in the doldrums and the property market showing sluggish growth, there is the risk that some home owners will lose money when selling their homes. Here’s how you can prevent this from happening to you.
In a perfect world people would never lose money when they invest in property. However, markets fluctuate and there are times when buyers will end up selling a home for less than they paid for it. The overall impact of slowing house inflation, interest rate hikes and a lack of demand are all factors that could impact on the selling price of property and while there are instances where sellers are going to incur a loss because of the urgency of a sale, there are ways to avoid the problem.
In a recent report John Loos, household and property sector strategist at FNB, noted that the percentage of properties sold below their original purchase price increased to 12.3 percent in January this year. Although it could be argued that this figure is negligible, the fact that 9.4 percent of sellers in this category sold for more than 5 percent below the previous price should raise some flags.
So how do you avoid becoming a statistic and end up selling your property at a loss?
Overpricing. We know we sound like a broken record because we bring this point up time and time again, but the importance of pricing your home correctly cannot be over emphasised. Sellers who insist their property is worth more than the current market dictates are generally going to end up selling for way less. This may not be too much of an issue if the sum they eventually receive is more than the price originally paid for the home, but it can be devastating if they are forced to sell at a loss, particularly if improvements have been made to the property.
Property is not a short term investment. Don't be in a rush to sell property that you recently (we’re talking three years or less) acquired unless it's absolutely necessary. With this in mind, it may be an idea to postpone a purchase if you are considering changing jobs, are thinking about moving to a totally new location in the next year or two or, perhaps most importantly, are buying a home you know you will outgrow in the next few years because you plan to start a family.
Get an idea of the average price similar homes in the suburb are commanding. Remember that just because you may be willing to pay over the odds for a particular home, this doesn't mean that others will be amenable to paying a premium when you decide to sell, especially if comparable homes are on the market for a much lower price.
Look at other properties for sale. Compare what's being offered at what price and price your home accordingly. Likewise, ensure your home is in immaculate condition.
Bide your time. Keep an eye on the market and sell when things are on an upswing. As previously mentioned, markets fluctuate all the time and attempting to sell when the market is depressed could cost you money.
Take the property off the market if little or no interest is being shown. Buyers know what's out there and are quick to assume there is something wrong with a home which languishes on the market for years. With this in mind it may be advisable to rethink your selling strategy by taking the home off the market completely and attempting to re-market it when sales start to improve in the area.