The Four Types of Home Sellers in Frederick Maryland

March 8, 2013 - PRLog -- In today's Frederick real estate market you will find four types of sellers !

Before you make any decisions about what to do with your property in Frederick, Bethesda or Potomac, Md., you need to know what type of seller you are so that you can be aware of the market’s possible impact on your plan.

You need to understand BOTH the market condition AND the type of seller you are.  There are four types.

1-  THE SELLER WHO IS SELLING THEIR PRESENT HOUSE AND BUYING ANOTHER

This seller is in a really good situation because they are not taking their equity out of the market!  They might have to sell at a discount to get their house sold, but they will also buy the next house at the same discount, so they aren’t really losing any money at all.

I once had a seller say to me, “I am going to wait for the real estate market to get better.”
I said, “I’m glad you realize that the market is cyclical and that you understand that home prices will increase again in the future.  My only question is this,
'Which house would you like to wait in, the house you are in now, or your new house?'”
I went on to explain to the seller that yes, they would see home values increase again, but waiting for the house they want to buy to increase in value, or waiting for the house they already have to increase in value, is simply a choice with no financial impact at all.

For example, if you have to reduce the price or accept an offer that is $30,000 less than you might have gotten in the past in order to sell your current house, in three to five years when the market cycles back, you will regain that $30,000 of equity in your current house or gain $30,000 in equity in your new house which was purchased at a discount as well.

2-  THE FREDERICK REAL ESTATE SELLER WHO IS BUYING A MORE EXPENSIVE HOME

This seller is in the best situation of all!  Higher end property tends to lose value much faster than lower end property during a correction.  Higher end properties also tend to appreciate much more during an appreciating market.  The seller in this example wins on both ends.

This seller may need to discount the price in order to sell their house, but the higher end home that they acquire will be at a much deeper discount.  They may drop their price $30,000 on a $250,000 house to get it sold but the seller on the $500,000 home just dropped his price by $60,000 in order to sell that one. In both cases, when the market recovers, each seller will get their equity back. Therefore, if the seller of the smaller home gives up $30,000 but gets back $60,000, he or she wins.

On the other side of this, the higher end real estate will appreciate much more during the next boom.  The $250,000 house could appreciate to $325,000 but the $500,000 could appreciate to $650,000 during the next boom.  The seller of the smaller house might get their equity back and then make $75,000 if they stay in the house for a decade.  If they sell now, they can buy the $500,000 home at a $60,000 discount and then make another $150,000 over the next decade while living in the home they wanted to buy to begin with.

3-  THE FREDERICK HOME SELLER WHO IS "UNDER WATER" AND MUST SELL NOW

This is a seller who has to sell in today’s market without waiting three or four years for better prices to return.  The bottom line is that they need to cut their losses immediately.  It is simply a function of a bad price now, or worse price later.  The problem is that “amateur investors” are not familiar with the idea of a “stop loss".

In the stock market for example, the professional trader will ALWAYS have a “stop loss” in place.  Usually at a loss of 8%.  If the stock goes down, they automatically sell and accept an 8% loss.  Amateur traders do not use a stop loss so at an 8% loss they are still in denial.  At a 12% loss they begin to stress and worry.  At a 15% loss they panic and when the loss reaches 20%, they accept reality and get out!

Homeowners do the same thing.  They don’t stop the loss and get out. They too, give in to their emotions and lose more and more of their equity by waiting.

4-  THE SELLER CAN NOT REALISTICALLY SELL HIS PROPERTY AT ALL

This is a seller who is unable to sell at today’s prices.  If you can’t cash enough equity out of the house to buy the next house, or you don’t have enough equity in the house to sell at today’s prices, then staying in the house might be the best option.

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Tim Brooks specializes in hard to sell listings, multi-million dollar homes and getting fast results. If you need to buy or sell property in Bethesda, Potomac or Frederick visit our website at: http://brooksgrouprealestate.com.