What Would a Seller Net—over 1 to 5 years
Today people move every 7 years on average. And a great many, for one reason or another, sell much sooner.
To more likely achieve a good financial return, and a larger downpayment on the next purchase, a good selling strategy is to keep a home for at least 5 years, if possible.
In spite of the market’s recent struggles, the average sale price in our region has appreciated by about 4.9% per year over the last 5 years, a figure that is higher than the historical average.
So what would a Seller's Net Sheet look like if you purchased 5 years ago and now decided to sell?
What would it look like if you purchased 4, 3, 2 and 1 year ago?
Let’s have a look using the following parameters:
- The sale price used is $215,020, the average price in 2009.
- The purchase price used is the average price for each of the previous 5 years.
- With 5% down, the mortgage is at 95% of the purchase price.
- The mortgage balance is based on a 5-year rate at time of purchase and a 30 year amortization.
- No penalties apply as the Seller is porting the mortgage to another home.
- Selling costs include legal, brokerage and GST.
Here is a picture of what a Seller net sheet might look like, depending on which year the home was purchased.
|
Avg. Sale Price Today
|
$215,202
|
Seller Net
|
|
Year Purchased
|
Avg. Purchase Price
|
Net After Mtg. & Costs
|
Less Down Payment
|
Gain/Loss
|
|
2008-1yr.
|
$210,981
|
-$1,285
|
$10,549
|
-$11,834
|
|
2007-2yrs.
|
$208,671
|
$3,773
|
$10,434
|
-$6661
|
|
2006-3 yrs.
|
$199,995
|
$14,815
|
$10,000
|
$4,815
|
|
2005-4 yrs.
|
$187,317
|
$29,807
|
$9,366
|
$20,441
|
|
2004-5yrs.
|
$172,835
|
$45,089
|
$8,642
|
$36,447
|
By selling within the first 2 years of ownership, the seller would experience losses. In the third year the Seller nets $14,815 and shows a gain of $4,815 after downpayment. Both a substantial net and gain is made in the 4th and 5th years of ownership.
Working through a Seller’s Net Sheet before deciding to sell is a worthwhile exercise. Ask your REALTOR® for assistance and get the mortgage balance from your lender. If not porting the mortgage, confirm discharge penalties with your lender.
Posted by Eugene Pilato
on March 27, 2010