Articles by Mark Honeybone
"Should I sell, or should I wait till the property is worth more?" "I really wanted $20k more. Should I accept this final offer?" "I'd lose $20k on my trade if I sell for that, what should I do?" These are questions that investors, homeowners and traders are faced with at times, especially when the market is on the decline or staying fairly stagnant.
Many wait in the hope that someone will come along and pay that golden figure they've been holding out for, but sometimes they may have to wait for years for that to happen. And waiting, particularly in a soft market, can come with a significant cost.That's why if you are a property trader, you should have an out-plan or an alternative plan. For example, if the market turns from bad to worse, or things don't go to your plan, ask yourself whether you can hold the property long term or whether it would be OK to sell at a loss.
Of course, there are many other reasons. But no matter the reason for selling, there is a significant point that many people forget about - the opportunity costs of not selling. In other words, holding on to a property can result in a much greater loss than selling quickly for a smaller loss.
People get too hung up about not getting the ultimate price (or even just what they consider a reasonable price) for their property. Then they end up in a falling market where they have to hold their properties for years and years to get what they want.In the meantime, if they'd taken that $20k less or even $50k less, they could have moved on with the next project and made $100k from it. Potentially they can do that several times during the time they need to wait for that extra $20k or $50k. It often doesn't make sense! The seller can be too emotionally involved and miss the big picture.
Note if the loss is shared within a group of partners or family members, then it is divided amongst them and isn't quite as bad as one might think.Remember, if you are waiting for another $10k or $20k, it won't take long before interest and other holding expenses add up to that amount and then fairly quickly surpass it — i.e. opportunity costs.
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