Buying a house is serious business… right? It’s a huge investment and is usually the most money we’ll spend in one place. But what exactly is the big deal?
What exactly does it cost us if we change our mind? What if we change our mind tomorrow?
I decided to run a case study using real Portland Metro data from this January and February. I wanted to illustrate the difference between actual, predictable cost of relisting a home immediately and terminating a lease.
The results were shocking. All things considered, average increase to sold price, closing costs, and real estimates of rent, you could loose more money canceling a lease.
Here is where I started:
The average house price in Portland for February was $569,200.
Let’s sketch a little case study, shall we?
February, 28 – you close on the purchase of a home with cash. You bring *approximately* $572,000 to the closing table. This is, of course, for the purchase price plus about $2,700 in closing costs like tax prorations, title transfer fees, and the cost of title insurance.
March 1, you decide to sell.
Last month the average price of a home went up 6.8%. Projecting that forward, the house would now be listed at $607,000. So, if you turned around and listed the property (and closed eight weeks later), you’d net *approximately* $569,000. This is, of course, the $607,000 asking price. But this time, about $38,000 has been deducted from your proceeds. This deduction includes credits and debits for taxes and *more* fees for title insurance but this time, you’re also paying (most commonly) six percent in agent fees.
To compare apples to apples, we’d subtract the *net* cost at close between purchase ($572,000) and sale ($569,000).
All in all, you’ve lost $3,000.
To cancel a lease in Portland, you are subject to a fee 1.5 times the monthly rent. Rentometer.com estimates the rent of a 4 bed 2 bath home in this area at $3,000. That’s a cancelation fee of $4,500.
So, we could make the argument that is it is more expensive to change your mind about a lease.
It bears highlighting, this is a story knit together with data, projections, and a little imagination. The data itself is not often so simple and the market surely never is. Each transaction, each property, is unique. Even two transactions on the same house can be considerably different. Data is wonderful but experience is critical. Knowing the nuance of the market in real time is invaluable, and it’s the greatest reason to hire the right agent.
If you’re considering buying or selling, or would like similar data for your neighborhood or home, reach out. I’d love to crunch some numbers and celebrate some nuance with *you*!