Figuring prices for houses in an era of sliding equity

October 04, 1992|By Copley News Service

The value of homes continues to slide downward in many areas of the country. And the resulting impact on owners extends far beyond a loss of equity.

Many home sellers just can't adjust to the fact that they may have to accept a price that is less than they paid for their home. It's not supposed to be that way. And owners often equate their financial health with the amount of equity they have in their home.

"The primary purpose of buying a home should be for shelter and the personal benefits of ownership," said Cathy Mims, a Realtor and chairwoman of a California Multiple Listing Service.

"A home should not be acquired as an investment for future retirement income," she said. "And when the time comes to sell that home, the asking price should be competitive in the current market.

"Many owners insist on listing their home for sale at a price that's just too high for the current market. Then they wonder why it doesn't sell."

However, in an increasing number of cases, sellers are willing to accept a lower price than they paid for the home, and make other concessions they wouldn't make in a more active seller's market.

One option: paying all closing costs. But watch out -- these costs can mount to thousands of dollars. So, some sellers agree to pay closing costs up to a certain amount.

Real estate agents also go the extra mile to market a home in today's market. One agent recently took three days to enhance the appeal of a listed home by painting its interior. During the same time, she held it open for inspection.

"I don't think we've seen the bottom of the home price curve yet," Ms. Mims said. "No one can accurately predict the future direction of that value curve. But regardless of that unknown factor, people want to own their own home and a lot of them are taking action to make this happen."

Owners also need to be more sophisticated about establishing a realistic price. How can they get the needed information? By reviewing recent sale prices of comparable homes, rather than simply adding profit to the price they originally paid for the property.

Despite the problem of lowering values, the home-selling market is increasingly active in most areas. With mortgage interest rates at a 20-year low and home prices reduced, many families are deciding this is a good time to act on their dream of owning their home.

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