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When NOT to Sell in a Seller’s Market

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Real estate market trends can be tempting, but read these tips before you put out that for-sale sign.

New housing data are being released, and you’ve heard that prices are on the rise once again. You might be getting the itch to sell. If it’s a seller’s market, why aren’t you a seller?

There are solid reasons why some of you shouldn’t sell, even in a seller’s market. I reached out to Mark Zipperer, broker/owner at RE/MAX Edge in Chicago to get the skinny on why many sellers should think “stay put” instead of “sell, sell, sell.”

The return from distressed

If you’re an owner in a recently distressed market, it’s easy to look at property value increases with a gleam in your eye. But Zipperer warns that current recovery levels might still be well below norms in many areas.

Consider a housing market that saw a 30% decrease of home prices. If your market saw a median home price increase of 14%, that still puts you well below predepressed market levels. Before you sell, Zipperer suggests that you look at the national real estate market as a whole and ask, “Will this appreciation continue?”

It’s not about getting greedy. It’s about making sure that you’re selling to recoup the most out of your property as possible without getting caught in a bubble-type situation. Don’t lose sight of your property’s potential just because some shiny numbers say the market is on the rise.

Assessing your rental market

Before you sell in the fervor of a seller’s market, look at your local rental market. Chicago has seen few new construction projects over the past five years, yet it’s seeing an ever-increasing demand for rental properties, thanks to the foreclosure boom and tightened lending restrictions from mortgage lenders.

This means that rental rates are climbing — and turning your for-sale property into a rental property could make more sense. He suggests sitting down with a local market professional to see just what kind of rent properties like yours can command. The most common response he hears from clients when he has this conversation? “You’re kidding me!”

A combination approach

In certain markets, Zipperer says, sellers can have the best of both worlds. If you don’t need the equity from the proceeds of your home sale to buy your next home, renting out your current home and buying a new home could be the better path.

As a landlord himself, Zipperer finds himself traveling with a plunger in his trunk and often unstopping a toilet or two at 1 a.m. “Being a landlord isn’t for the faint of heart or thin-skinned,” says Zipperer.

However, he encourages you to do the math on what that plunger (and all of the other typical landlord responsibilities) might earn you. If the value of your rental is $300,000 and property values are increasing in your area to the tune of 8% annually, that plunger is earning you a gross of $24,000 a year — in addition to the cash flow you could enjoy if rents in your area exceed your mortgage payments.