Understanding the “Lost Equity Syndrome”
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This post is my second in a series relating to our white paper, The 6 Reasons Today May Be the Best Time in 40 Years to Buy a Home. I want to focus on Reason Number 6: Avoiding the “Lost Equity Syndrome.” This is the “Reason” that is often the hardest for buyers to grasp. It really speaks to why now is a good time to sell a home, and then turn around and buy another one…if you’re buying a more expensive home. Many potential “move up” buyers are paralyzed by the fear of losing some of the equity in their current home when selling now. We call this fear the “Lost Equity Syndrome.”
Sellers who want to be buyers are afraid to act now because they don’t want to “take a loss” on the home they have to sell. They don’t want to lose that equity. Here’s what they need to understand about the “Lost Equity Syndrome.” Let’s assume they have a $150,000 home to sell. And, assume they are ”moving up” to a $250,000 home. If they take a 10% “loss of equity” on the sale of their existing home…say $15,000…because of current market softness, doesn’t it make sense that the seller of the “move up” home they intend to buy will be taking a 10% haircut too? 10% of $250,000 is $25,000. The “move up” buyer gains the seller’s “lost equity”. A $25,000 gain net a $15,000 loss means the new “move up” buyer actually comes out $10,000 ahead. It’s critical that potential “move up” buyers really understand how the “Lost Equity Syndrome” works in their favor in today’s real estate market.
Your thoughts and comments are always welcome. For a copy of our white paper, The 6 Reasons Today May Be the Best Time in 40 Years to Buy a Home, contact your local Carpenter office or visit our website, www.callcarpenter.com.
Posted by: 
David Caveness
