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| Home sale example | Home Sale Comparison | Home Investment |
Growth Rate
I want you to make a lot
of $$$$$
when you sell your home!
That is really what growth rate is all about, and why I keep track
of it in my neighborhood statistics. Growth rate is the percentage that
a home went up in value.
It is better to love your home and make $50,000 when you sell, than
to love your home and make $25,000.
Home Sale Example
Purchase price $198,275
It is August of 2001, Joe and Sue are looking for a home.
They decide to have a new home built in a nice subdivision. The rates are
great and they can get into it for very little money down, plus the monthly payment
is very affordable. Joe and Sue buy a new home for $198,275.
Everything is going great with Joe and Sue. They love their home. They are glad they
decided to have a new home built. Then, in the summer of 2003, Joe gets a great
job offer out of town. Joe and Sue decide he should take the job offer and they will move.
Up for sale
Joe and Sue meet with a Realtor and have their home put up for sale.
The home has a few showings, but does not get any purchase offers. Taking
the advice of their Realtor, Joe and Sue decide to lower the price. Now
they will not make as much money as they had hoped, but Joe has to leave town
for his new job. Lowering the price should bring in a few purchase offers.
No purchase offers
3 more months go by, there are a few more showings, but still the home sits without any
purchase offers. Joe and Sue believe a new Realtor will make the difference. The home is
put up for sale with a different Realtor. Joe and Sue list their home for sale, but
now they are really anxious to sell, so they lower the price again. This
will mean taking a loss, but it is worth it to get the home sold.
Sales price $178,000
Again more showings, but no purchase offers. 3 more months go by, Joe and Sue are really
feeling desperate to get their home sold. They tell their Realtor they are
willing to take whatever offer is made. Finally, after 241 days on the market,
an offer comes in. Joe and Sue sell their home for $178,000.
Over $20,000 loss
This story, while made up for the example, happens repeatedly. The numbers
are real and taken from a home sale in 2004. This particular home
sale resulted in a loss of over $20,000.
Home Sale Comparison
Comparison
Below are the statistics on the new home used for
this story. The statistics can be found at the Delaware County Auditor website.
I compare the home from the story with a very similar new home, which from a financial
standpoint, would have been a better purchase for Joe and Sue. The new homes
compared below were built at the same time and at a similar price.
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344 Amber Wood Way |
1770 Pinecone Ct |
|
Purchased |
8/1/2001 |
Purchased |
8/17/2001 |
|
Sold |
1/27/2004 |
Sold |
7/12/2004 |
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Days to Sell* |
241 |
Days to Sell* |
41 |
|
Purchase Price |
$198,275 |
Purchase Price |
$188,242 |
|
Sales Price |
$178,000 |
Sales Price |
$211,000 |
|
Loss |
$20,275 |
Profit |
$22,758 |
* Days to Sell was obtained from the Columbus Board of Realtors
Home Investment
Your home is an investment
Growth rate looks at your home as an investment:
- How much money did you make when you sold your home?
- How much did your home go up in value each year?
In the Neighborhood Stats Report I list the average growth rate
on each home that sold. Average growth rate is the percentage that the home when up in
value each year, on average. The home may have gone up in value 4% one
year and 6% next. This would be an average growth rate of 5% per year.
Why is growth rate important?
Knowing a neighborhood's average growth rate can help in the following ways:
- in determining the value of your home when it is time to sell
- in determining the value of a home you are thinking of purchasing
- in determining whether you should take a particular offer when you are selling your home.
- in determining when you have 20% equity and should hire an Appraiser to get rid of costly PMI, if you have it on your mortgage.
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