My wife and I sold our home about a month ago, and unfortunately, we lost a lot of money on the transaction. We knew we would lose money before we even put our home up for sale – housing prices have dropped substantially since we made the purchase and the inventory in our market was flooded with foreclosures and other homes (there was a 15 month inventory on the market when we listed our home for sale). All signs were pointing toward us taking a big loss on our home – and we did.
Our story isn’t unique – people around the country are facing similarly depressed real estate markets and many people can’t sell their house for a variety of reasons. If they must sell, people are forced to sell at a loss, which brings both financial and psychological challenges. The difficult markets are even causing some people to walk away from their mortgage.
Wait it out if you can – but don’t let it stop you if you have to move
If ever ever there was a time to try and wait out a bad market, this is it. But not everyone can wait – you may need a larger home for a growing family, your job may take you elsewhere, or you may have to move for a variety of reasons.
Our decision to sell was two fold: We needed a larger home for our growing family and we wanted to relocate to be closer to my wife’s family. We didn’t have the luxury of waiting out the markets, and renting wasn’t a good option either. So we decided to sell our home.
Unfortunately, the real estate market took a huge hit since we purchased the home in 2005, and our area had a glut of foreclosures. So we were forced to initially list our home for $25,000 less than we had in it. Nothing like taking a $25,000 hit before you even sell your home!
Of course, it doesn’t stop at the list price – you also need to take other expenses into consideration – closing costs, real estate agent commissions, taxes, home warranty, and other fees. The initial estimate was that we would lose in excess of $40,000… and we were right.
Accepting the offer on our home
Fast forward 6 months. We received an offer on our home almost exactly 6 months after we listed it. The offer was for $40,000 less than we had in the home. This was the first real offer we received and we wanted to accept it. So we made a small counteroffer. They asked for a $10,000 price reduction from the list price, and we countered with a $7,000 price reduction. We didn’t ask to meet halfway because we didn’t want to lose the sale. In retrospect they probably expected to meet halfway and we probably would have gotten it. But at that point I wasn’t willing to lose a sale over $2,000. The buyers accepted the counteroffer right away, so we were good to go.
Wrapping it up. After we agreed upon a sale price we just had to dot the i’s and cross the t’s. We paid the closing costs, commissions, a few minor repairs found in the house inspection, taxes, fees, and other expenses. Altogether, we ended up losing just over $50,000*.
*This isn’t a perfect calculation when you take into account factors such as time value of money, interest, etc. It’s simply a calculation of the purchase price minus the final sale price, commissions, fees and associated costs.
Losing money is a tough pill to swallow, but it isn’t the end of the world. Now that I’ve had a month to digest this, it isn’t as bad as it first appears. Yes, we lost $50,000. That’s tough to swallow. But we also get to move on with our lives – we aren’t locked into a house which is too small for us and we get to live closer to family, which is priceless. But there are several more reasons why I’m not too upset about losing $50,000. And I’ll tell you all about it tomorrow. 😉
Have you sold a home in this market? How did it work out for you?