Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: get shorty who wrote (7002)	11/21/2002 6:04:51 PM
From: MulhollandDrive	Respond to of 306849

>>Does that sound accurate? I thought I was familiar with most of the costs associated with the buying/selling of a home. I can't come close to coming up with 20% in transaction costs.<< since you can escape taxes on $500k of the sale of a primary residence ..$250k for singles... i'm not sure how the writer comes up with 20% either. you have your fees associated with the realtor or attorney , and of course moving expenses, but 20% sounds high to me too. it would nice when a writer makes such an assumption, he would break it down and "prove" it.

To: get shorty who wrote (7002)	11/21/2002 6:21:52 PM
From: MSI	Read Replies (2) \| Respond to of 306849

Transaction costs: at least 10% sell-side, not including the carry and new home purchase. The 20% includes worst-case -- such as the vacation/rental home I sold for my mother in WA recently, who couldn't use the 1031 exchange since she wanted cash, so she got hit with: a) 7% r.e. commission (btw an absolutely excellent agent worth every penny, who cleaned the place, hired workers to paint, inspected, got all kinds of things investigated and done since I wasn't up there) b) 1.5% excise tax for the state of WA (not all states have this) c) 1.5% escrow and title fees d) 2% carry (four months since it was felt it would sell better empty than rented) e) 7% cap gains (18% on the gain, adjusted to % of total price for this comparison) Total Seller cost: 19% and 5 months To accurately portray total costs you have to include buy-side costs, such as 2% or so new financing fees. All that's reduced accordingly if it's your primary residence, you're not in WA, FSBO, etc. But still, large trx costs for selling a home and buying another one are another curb on volatility and liquidity (in addition to the huge hassle of moving etc etc)

To: get shorty who wrote (7002)	11/21/2002 8:44:51 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

The author suggested that to try and "time" the RE market was foolhardy. The article basically espoused the same buy and hold philosophy that's usually associated with equities. I have always believed in the absolute importance of Valuing the Market, aka "Buy Low Sell High". I believe people who ignore valuation and instead talk about "buy and hold" or "timing the market" are either confused or trying to confuse you. I did not sell my equities simply because they became excessively valued during the recent equity bubble. But excessive valuation did inform me to be eager to sell in 2000 when the upward trend ended. Obviously transaction costs for real estate are higher than they are for equities. Additionally lead time to sell real estate is measured in months rather than minutes. But excessive valuation in real estate should inform you to be eager to sell when the upward trend ends. Valuation is the most important tool an investor needs to know. Value compares the price of an investment with the income and risk of that investment, relative to other investments. By this yardstick real estate in many geographic regions is overvalued. Southern California in particular, where Condos now sell for the same square foot price as homes in the same area, would make me especially eager to sell a Condo as this disparity in valuation will not continue. If you would like to own real estate, or do already, learning how to appraise property value is the most important investment you need to make. Buying a property or a stock because a fast-talking salesman tells you "it's a sure thing" or "it will only go up" will eventually lead to grief. I have noticed that people will invest far more time and effort in getting a "good deal" on a car than they will in getting a good deal on investments with their life savings. The results of this are catastrophic.