Selling our home at a loss - crunching the numbers

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Razl

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We plan to put our house up for sale soon due to a recent job relocation for me. With the current state of the real estate market, I project that we will leave the closing with a NET LOSS of $30,000 (we've only been here 2 years). Ouch, I know.

But then, I started thinking..."Hey, we can buy our next house for $30,000 less than it was worth in 2006, our net loss would be a financial wash. Is logic correct or am I missing something??

I don't know if this matters but we plan to downsize for our next home purchase.
 
Originally Posted By: Razl
We plan to put our house up for sale soon due to a recent job relocation for me. With the current state of the real estate market, I project that we will leave the closing with a NET LOSS of $30,000 (we've only been here 2 years). Ouch, I know.

But then, I started thinking..."Hey, we can buy our next house for $30,000 less than it was worth in 2006, our net loss would be a financial wash. Is logic correct or am I missing something??

I don't know if this matters but we plan to downsize for our next home purchase.


I am sorry about your financial loss. I know what you're going through.
frown.gif
 
I've been renting an apartment for the past two years. my wife graduates in December. we'll be in the market by march 09. sorry for your loss
 
The benefits of a decline in home prices are realized if you're buying up. All things the same, you'll realize a loss if you buy down in housing. You have to look at the percentages, not every house is going down $30K in value.

The tax implications have been a hot-button issue for a long time in Detroit. Rshaw125 is correct. The IRS wants to tax you when you sell your house at a profit, yet gives you no break when you sell at a loss. This is the only place I know of where the IRS does that. In every other case, one can claim profit OR loss for tax purposes, whichever applies.
 
Originally Posted By: Kestas
The IRS wants to tax you when you sell your house at a profit, yet gives you no break when you sell at a loss. This is the only place I know of where the IRS does that. In every other case, one can claim profit OR loss for tax purposes, whichever applies.


No, you can exclude 250k (500K if Married filing jointly) of capital gain on the sale of a personal residence if you've lived there for 2 out of the last 5 years. Which is why you can't deduct the loss.
 
Originally Posted By: oilyriser
Property taxes will drop, as home prices drop.
LOL.gif


Did we step into dark comedy here, oily?
grin2.gif
 
IF you buy a car for $20,000 and are forced to sell it 2 years later for $10,000 because you need to move, but once you move, you buy the exact same type of car for $10,000. Have you lost anything??? Thats your call.

You might be able to deduct the $30,000 from your income taxes as a loss.
 
Let me clarify loss. We put $120,000 down payment. So, I'm projecting we will get about $90,000 out-the-door after everyone else gets their handout.

The fight side of me says to hold in there, suck up the commute, and wait it out. But then, the flight side says take the hit and make it up on the new purchase.

I guess the term "wash" is not right here. Maybe could I consider a move a lateral exchange of loss? In the end, when the market picks up (whenever that is), I will realize less gain by downsizing than holding out.
 
Well, to carry the mortgage and rent would be the best call. Use a re agent and you should do well. Crunch the numbers on loosing $30k vs stretching out that "loss" for a few years when the market will return for sales. otoh, all of our homes are worth exactly the same, zero. Why, because if you sell it, you need someplace to live and would use that money to buy again, a wash....as you said.
 
Originally Posted By: Gary Allan
Originally Posted By: oilyriser
Property taxes will drop, as home prices drop.
LOL.gif


Did we step into dark comedy here, oily?
grin2.gif



Funny how it doesn't work that way!

razl, on paper yes I would define it as a loss. AJ has the ideal, which is what I SHOULD have done with all my houses. But the desire to put the max down always gets in the way....I always would trade so called leverage for a smaller payment.

I bought this house for $395K a little over 2 years ago in Sept 2005, when prices in the area were still in hyperdrive. Neighbor across the way just bought in for $529K. We have a bit nicer floor plan, 3 car garage and sportcourt/RV parking area, he has a bit better garden area. I doubt he could sell his house for $499K, maybe $479K. So, I GUESS I'm still in the black.......but I don't think I'll be talking property values with him!
 
AJ hit the nail on the head.

My first apartment, the landlady herself had lived in for a time. Easier to get a loan on a place you live in.

Then, sometime later, convert it to rental property. Your next loan on your next home will still be for your primary residence.

For all we know your tenants might be looking to buy but unable to get a loan due to the current fiasco. May give them that option in the lease for after it expires.

IDK what interest rate you got on your "old" place but it may be less than the new. If you can keep that mortgage you could command premium rent, which will still be cheaper than a new house payment (or will help make yours).
 
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