There’s no doubt about it – real estate is a great investment. There is huge money-making potential when you own real estate. But how do you know if you’ve held a property too long?
“I believe that real estate is a good investment. The longer you hold it, the better it is,” explains Jeanette Brox, a Toronto-based certified financial planner. “Statistically, over the long run, people always make money in real estate. Where I get concerned is when my clients are going to invest in a property for a short period of time. It’s important to always go in with eyes wide open and know your numbers.”
Reason 1. They are waiting for peak market to come back.
One of the reasons why people hold onto a property too long in Washington DC, PG County, Montgomery County, Washington DC and Maryland is that they are waiting for the prices of the real estate market to double, or triple! The real estate bubble of 2004-2005 is not bound to happen again any time soon. Some real estate owners are watching the market regularly and aren’t seeing the huge price increase they were hoping for. They watch it increase for a few years, then it corrects itself and goes back to where they bought it. They have a plan to make a certain percentage on their investment, but taking into account the annual taxes and the original investment, it is starting to become more money invested than they will ever see come back through a sale without the real estate peak market.
Reason 2. They inherited it from family
Another reason why people hold onto a property too long is that they inherited it from a really close family member, possibly their parents or grandparents. They want to hold onto that property forever to keep a piece of them in their lives, even though they never plan to live in it, rent it out, or build on a piece of vacant land. It might not even be in the same state! The annual taxes or homeowner’s association fees might even be a little too much for their budget, but they don’t care. They want to hold onto the property as long as possible.
Reason 3. They plan to build
A more practical reason why people hold onto a property too long is that they plan to build on it. Maybe they’ve done a ton of research on the neighborhood and it’s a perfect fit for them and their family, but they can’t afford to build. Or maybe they can’t settle on the perfect floorplan for their dream home. They hang on to the dream of building, but never actually build. They do, however, pay taxes and maybe even homeowner’s association fees, but they hold on to the property with hopes that one day they will actually build their house.
Reason 4. They want too much money
Whether you’re working with an agent or going it alone, setting the right asking price is key. Remember the comparative market analysis you or your agent did when you bought your home to determine a fair offering price? Buyers will do this for your home, too, so as a seller you should be one step ahead of them.
You may think your home is worth more, but remember to set a realistic price based on comparable homes in the area.
Absent a housing bubble, overpriced homes generally don’t sell. In a survey conducted by the informational home sale website HomeLight.com, 70% of real estate agents said that overpricing is the number one mistake that sellers make.2 Don’t worry too much about setting a price that’s on the low side, because in theory this will generate multiple offers and bid the price up to the home’s actual market value. In fact, underpricing your home can be a strategy to generate extra interest in your listing, and you can always refuse an offer that’s too low.
Reason 5. They have fond memories
Another reason why people hold onto a property too long is that they might have really fond memories. Emotions are hard to deny. Maybe their grandmother lived there and they grew up in the kitchen making pumpkin pies for Thanksgiving with her, or learning how to make pistachio thumbprint cookies in the dining nook. Maybe it was their first house as a married couple and have lots of happy memories cuddling in the den watching movies. Maybe it’s the house their children grew up in and they made notches in the door frame marking their growth. These are all extremely strong emotions to override and they are understandable reasons why people hold onto a property too long in Washington DC, PG County, Montgomery County, Washington DC and Maryland.