Recent Market Increases Now Open Door for Move-up Sellers | Print |  E-mail
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Wednesday, 20 June 2012 10:55


By Carl Medford, CRS

Special to the Forum



As any given market swings up and down, the participants change.

 


As an example, investors typically avoid high markets but, in contrast, stampede in hordes to buy when the market declines.


It’s the same with sellers: with real estate prices in the dumps, those selling properties have been limited to banks liquidating foreclosures, financially distressed owners unloading short sales, estates divesting themselves of probates/trusts or those who’ve been packing up and heading out of the area. A significant group has been missing.


Move-up sellers.


In a normal market, move-up sellers constitute a high percentage of actual market activity. It’s different, however, when the market is down.


Truthfully, the best time to sell your existing home and move up is when the market is at the bottom. While you may sell at a discount, you’ll get the home you’re moving up to for a lower price as well. It’s all about “the spread.”


“As an example,” informs Gary Marciel of Marciel Realty, Castro Valley, “if you are selling a home for $300,000 and buying a replacement for $400,000, the spread is $100,000. If the market increases 10 percent, you’ll be able to sell your existing home for $330,000, but your move-up property will also have increased in value to $440,000. The spread will now be $110,000. Obviously, the maximum benefit comes to those who can sell when the spread is the lowest.”


Unfortunately, it’s not a perfect world and hope is frequently overruled by reality.


Depressed market values of the past few years come with a caveat that actually limits move-up potential. As prices drop, equity decreases as well. Usually, equity from a seller’s current home is required for the down payment on the move-up digs. As equity declines, the ability to move up simply evaporates like an ice cube in a hot skillet.


It’s a true Catch 22 scenario. Many who would love to capitalize on the current spread are being held captive in their existing homes by either a very low equity position or, worse yet, a minus equity situation.


Good news appears to be on the horizon: Current market increases means that equity is trending upward as well. And with each market advance, the door is opening a crack wider for those in a poor equity position to being able to sell and move on up.


It’s just a matter of time until the door is fully open.



Carl Medford is a licensed Realtor with Prudential California Realty in Castro Valley and a licensed general contractor. This article is sponsored by the Central County Marketing Association at www.ccmgtoday.com

 


 

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