Timing in the world of real estate is pretty important; you don’t want to sell during a buyer’s market, or buy during a seller’s market, or anything like that. That’s something people talk about a lot. Yes, timing is important, but in other ways than that. I recently read a post from the blog of the Manhattan-based Warburg Realty, which looked at a different more way that timing is important in the real estate world. Timing the sale of your home or investment, according to the author, depends on your next steps.
Sellers are often hung up on their price. Yet that number is ultimately irrelevant unless you’re exiting the market. The number that matters is the difference between what you sell for and what you buy for. You want that number to be as small as possible when you’re buying, and as large as possible when you’re trading down. Trade up when the market is slow, and down when it’s hot. Contemplate your trades in terms of percentages.
For example, if you own a two-bedroom home, but need one with three bedrooms, figure out how much more that costs in terms of percentage and adjust accordingly. Let’s say it costs 50% more; if the market is hot, and your current home costs $2 million, then your next place should cost you $3 million. But if the market is down 10%, your home is only worth $1.8 million, and your new home will cost around $2.7 million. And then you just saved $300,000. The opposite holds true when you trade down.
The points that the article makes are interesting. Market success doesn’t always mean getting the highest price for your property; it also can mean playing the smallest increment for your next purchase. By figuring out the final impact on your bank account, you can see whether or not your sale or purchase is smart.