Thoughts on Losing $50,000 on Our House – And How it Could Have Been Worse

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Selling your home in a down market is tough. So far, I’m 0 for 2 in selling homes for a loss. My wife and I have owned two homes, and we lost money on both of them. Obviously, no one sets out to lose money when they buy a home, and no one feels good…

Selling your home in a down market is tough. So far, I’m 0 for 2 in selling homes for a loss. My wife and I have owned two homes, and we lost money on both of them.

Obviously, no one sets out to lose money when they buy a home, and no one feels good about it. But at the same time, I realize it’s probably not as bad as it seems.

My wife and I sold our first home in 2010, and unfortunately, we lost a lot of money on the transaction. It took us 7 months from the time we listed our house until the time we finalize the sale, and we lost just over $50,000 on the transaction.

The second home sale was more recent, coming in 2019. We purchased this house right after selling our home at the end of 2010. We bought in early 2011 and lived in that home for 8 years. We sold at a loss of $3,000 on the purchase price. But when you add in upgrades, improvements, and real estate agent fees, the final tally was closer to a $25,000 loss on paper.

I have conflicting thoughts about losing this much money.

Yes, we lost money. But living somewhere costs money regardless of whether you rent or buy.

My situation is a reminder that buying a house is a luxury. You won’t always make money when you buy a home. It is very possible to lose money on your purchase. And yet, even after losing money on the first two homes my wife and I owned, we decided to buy another home.

In this article, I’ll share more about

  • our decision to sell our home in a buyer’s market,
  • why it didn’t turn out as bad as it could have been,
  • and tips for listing your home in a down market.
 

Deciding to Sell Your Home in a Down Market

We knew we would lose money before we even put our home up for sale. We listed our house for sale in the middle of the Great Recession, and housing prices had dropped substantially since we bought our home. The real estate 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 there was a time to try and wait out a bad market, that was 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:

  1. We needed a larger home for our growing family, and
  2. 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 out our home wasn’t a good option either (the house was a townhome, with relatively high monthly association fees, which would have made it difficult to break even if we rented it out).

So we decided to sell it.

Unfortunately, the real estate market took a huge hit in the time that my wife purchased the home in 2005, and our area had a glut of foreclosures. We initially listed 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.

Thoughts on Losing Money on Our House

We knew we would lose money on the transaction, so we were prepared for it. Being mentally and emotionally prepared to lose money is important. In the grand scheme of things, we just considered losing money on our home a sunk cost and decided to move on. Here are some factors which made the loss easier to swallow:

We Had Enough Equity to Cover Our Losses

Losing money isn’t fun. Writing someone a check when you’ve already lost a lot of money is even worse. Thankfully, we had enough equity to cover our losses, so we didn’t have to write a check at closing. We put down 20% of the purchase price when we bought the home, and we paid extra on our mortgage payments. This combination ensured we would receive a small check when we sold our home instead of being upside down on our mortgage.

If We Didn’t Buy, We Would Have Paid Rent

Some people say renting is throwing away money, but I disagree. There are many advantages to renting a home.

Many people who rented during the real estate bubble avoided taking substantial losses when they had to move. And in our case, we may have actually come out slightly ahead, depending on how you slice the numbers.

We lived in our home for just over 5 years. If we would have “thrown away money” on rent for 5 years, we probably would have lost a similar amount of money, give or take a little.

Renting a comparable home in our area likely would have cost between $1,250 – $1,500 per month. But you can play with numbers to see how much renting will cost over time.

For example, renting for 5 years is 60 months.

  • $1,000/mo * 5 years = $60,000
  • $1,250/mo * 5 years = $75,000
  • $1,500/mo * 5 years = $90,000

Again, this doesn’t take into account other factors such as the time value of money as the down payment could have been invested, home repairs, or other expenses.

Either way, we would have spent a lot of money on housing.

Does Renting Cost More than Buying? The answer depends on many factors, including where you live, how long you plan on remaining in the home, and many other factors. Additionally, selling a home is very expensive. Real estate transaction fees made up a large portion of our “losses” when selling our homes. In some cases, renting is more expensive than buying. But in many cases, renting is cheaper in the long run and provides more flexibility. See this Rent vs. Buy calculator from the NY Times to compare renting an buying in your area.

We Could Have Lost More Money

The real estate market in our area of the US was hit pretty hard. We just left the Dayton, OH area, which lost tens of thousands of jobs, and for a period of time, it was in the top 10 for foreclosures. As you can imagine, that created an excess of inventory and decimated housing prices. Thankfully, our neighborhood was relatively insulated from the price drops compared to some of the other neighborhoods.

Some People Can’t Afford to Sell, Even if They Want To

The real estate markets in some locations are so bad that the majority of people are upside down on their homes and selling would mean having to fork over tens of thousands of dollars they don’t have. Many people are so far under in their mortgages that they decided the best course of action was to walk away from their mortgage.

We Can Make it up on the Back End

We want to buy another home, and the saving grace for us is that real estate prices are lower in most places, hopefully making this a good buying opportunity for us. Our hope is that we can get more house for our money when we buy our next home. Our goal is to stay in our next home for the next 5-10 years, so hopefully, things will turn out better the next time around.

All of these things may sound like rationalizations, and to some degree they are. But it also serves as a reminder to myself and others that real estate isn’t a guaranteed investment.

How to Sell Your Home in a Buyer’s Market

The real estate market doesn’t always want to cooperate when it’s time to sell your home. Sometimes the market is booming. And sometimes it’s very slow. If you plan to sell your home in a buyer’s market, there are some things you will have to do.

Research Your Local Real Estate Market

As you know, real estate is local. Do research on homes that have sold in your neighborhood, and in your wider area. Get an idea of the price range of homes that are comparable to yours, and consider what you are likely to get. In my neighborhood, there are a lot of homes for sale; just on my street, I can see four homes for sale. Many homes are selling for $20,000 below “market value.”

Zillow, Trulia, RedFin, and many other online home value estimates are just that – estimates. The true value of your home is whatever anyone will pay for it.

Have Realistic Expectations on Price

In order to sell your home in a buyer’s market, you are going to have to price it competitively. This means that you might take a hit on the home. Additionally, you may have to show that you are willing to move on the price. Your listing should include an “original price” and a “current asking price.”

You could also update your ad to highlight a price drop. Many buyers can afford to be picky and look for sellers willing to move on the price. Realistically, in a buyer’s market, you will not get what you think your home is worth.

Add Value to Your Deal

You will also need to add value to your home. Sellers are expected to pay closing costs as it is. However, you may need to add something else, such as paying for inspections, offering a flooring allowance (if the carpet is worn) or paint allowance, or some other upgrade.

Point out the features of your home, such as a fully-fenced yard, a water purification system, or a drip-system for the garden, or anything you have done to improve your home’s value. If you have extra features, make sure that you highlight them to encourage buyers to see your home as a good bargain.

Use the Internet to Advertise Your Home

Most people look for homes online. You need to have some sort of an Internet strategy to help you sell your home in a tough market. If you have a real estate agent, find out what sort of online packages are offered. Remember that lots of pictures are desirable. You want to show your home to best advantage, and buyers are more likely to look at your home if there are pictures online.

Make a Good First Impression

If you want to get the best possible price for your home in a buyer’s market, you need to make a good first impression. When publishing pictures of the outside of the home, take pictures each season. A dated photo underscores the fact that the home has been on the market forever, and you may not get the best offers. You should also make efforts to keep the home clean, improve the curb appeal, and clear out the clutter. If you are having trouble, a professional staging might help.

What are some of your tips for selling in a buyer’s market?

Have you bought or sold a house recently? How did it work out for you?

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. American Debt Project says

    Hi Ryan, new to your site, so sorry if you’ve answered this elsewhere..where did you guys move to? And why did you decide to leave Dayton/how did you choose your new city?

  2. K says

    Hi Ryan,

    I’m not sure how old this post is because I don’t see a date listed, we live in the Dayton area and are very concerned about how much we stand to lose on our home. We purchased two years ago (recently married and very eager to buy a house…), but unfortunately, we bought small thinking that the market had gone as low as it was going to go and that we would just get out in five years when it was time for an upgrade. (You can’t undo the past, but we would never make the same decision twice.) Do you have any advice about selling in the Dayton market? We are north, so unfortunately we are losing out on some of the popularity of the Kettering/ Beavercreek area. We are so afraid that when the time comes and we want to get out, we won’t be able to swallow the loss that is sure to come.

  3. Mike says

    Just went through some “similar” – when my wife and I married, we put her house up for sale, but being a small town and a big house proved to be disasterous for a housing market.
    After 5 years, we sold it for a $50,000 loss … any idea how that works as far as capital losses in taxes? Did you make any back in the way of taxes?

    • Ryan Guina says

      Mike, unfortunately, you cannot claim a capital loss on the sale of a personal residence. The IRS requires you to report a capital gain when you sell a home, but they do not track or give credit for a capital loss on the sale of a personal residence. Sorry. (The rules may be difference for investment properties, but you would need to show the intent to either rent the home or repair and flip for a profit).

  4. Jackie says

    Looks like we’re going to suffer a similar experience. Any advice on letting go of that loss and the “what ifs” ?

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