4 ms·

Sure, but in the case of job loss + foreclosure or short sale, all of that goes up in smoke. It's a big risk.

nawitus 13y ago
I wonder why one can't sell a house for about 95% of the market value in a month. I mean it sounds like a good deal: the property owner can sell the property quickly to pay off the mortgage, while keeping some of the savings for himself. The real estate investor will make 5% of the value of the house in a few months (minus expenses).
- refurb 13y ago
  What makes you think you can't do that? Unless the housing market is frozen, pricing a home under the fair market value usually results in a pretty quick sale. However, closing in 30 days might be tough. 60 days is probably the norm.
  - nawitus 13y ago
    I didn't say that you can't sell houses sometimes under 30 days, my case was about certainly selling your house in 30 days for significantly (~5%) under the market value. If that's actually possible, then the parents claim "in the case of job loss + foreclosure or short sale, all of that goes up in smoke" is incorrect. If it's not possible, then I wonder why, because the economics seem to make sense.
    - gohrt 13y ago
      5% of market value, 4-6% brokerage fees, ~3% transaction fees, ~1% in switching costs (double-rent), adds up to most of the home equity most people have.
    - ghaff 13y ago
      Plus, as is probably still the case in a few parts of the US, a given mortgage may well be underwater (i.e. the house, even at market value, may be worth less than you owe). As others have pointed out there are also a lot of transaction costs, especially for a house (don't forget moving/storage/etc. too). If you've largely paid off your mortgage, sure, but then you have a great source of collateral if you need some short-term money.
    - tsotha 13y ago
      In the US you can sell a house quickly if you can list it at an attractive price. I did it once - I had to start a new job far away in a relatively short period of time, so I sold my house in 15 days, including escrow. It probably cost me somewhere in the neighborhood of 6% of the total value. But to do that you need equity. In a short sale or a foreclosure you're leaving the house without any money, which "up in smoke" seems to describe.
- drinkzima 13y ago
  Transaction costs on housing hover around 5-6% generally, and that ignores holding costs. Housing isn't an 'economically perfect' marketplace.
  - nawitus 13y ago
    Fair point. Transaction costs for the seller where I live apparently only include the estate agent commission, which can be 3% or even a fixed amount (e.g. 3k€).

I wonder why one can't sell a house for about 95% of the market value in a month. I mean it sounds like a good deal: the property owner can sell the property quickly to pay off the mortgage, while keeping some of the savings for himself. The real estate investor will make 5% of the value of the house in a few months (minus expenses).

refurb 13y ago
What makes you think you can't do that? Unless the housing market is frozen, pricing a home under the fair market value usually results in a pretty quick sale. However, closing in 30 days might be tough. 60 days is probably the norm.
- nawitus 13y ago
  I didn't say that you can't sell houses sometimes under 30 days, my case was about certainly selling your house in 30 days for significantly (~5%) under the market value. If that's actually possible, then the parents claim "in the case of job loss + foreclosure or short sale, all of that goes up in smoke" is incorrect. If it's not possible, then I wonder why, because the economics seem to make sense.
  - gohrt 13y ago
    5% of market value, 4-6% brokerage fees, ~3% transaction fees, ~1% in switching costs (double-rent), adds up to most of the home equity most people have.
  - ghaff 13y ago
    Plus, as is probably still the case in a few parts of the US, a given mortgage may well be underwater (i.e. the house, even at market value, may be worth less than you owe). As others have pointed out there are also a lot of transaction costs, especially for a house (don't forget moving/storage/etc. too). If you've largely paid off your mortgage, sure, but then you have a great source of collateral if you need some short-term money.
  - tsotha 13y ago
    In the US you can sell a house quickly if you can list it at an attractive price. I did it once - I had to start a new job far away in a relatively short period of time, so I sold my house in 15 days, including escrow. It probably cost me somewhere in the neighborhood of 6% of the total value. But to do that you need equity. In a short sale or a foreclosure you're leaving the house without any money, which "up in smoke" seems to describe.
drinkzima 13y ago
Transaction costs on housing hover around 5-6% generally, and that ignores holding costs. Housing isn't an 'economically perfect' marketplace.
- nawitus 13y ago
  Fair point. Transaction costs for the seller where I live apparently only include the estate agent commission, which can be 3% or even a fixed amount (e.g. 3k€).