Should I sell my house for less than I paid for it? What you need to know
By Amanda Scali

15/09/2016 12:00am

Should I sell my house for less than I paid for it? What you need to know

You might think the decision to sell my house for less than I paid for it is one you will never have to make. But sadly, there might come a day when you need to consider this action.

In Australia, there is an expectation that property will always appreciate and, therefore, buying ‘bricks and mortar’ will always be a safe place to put your money.

Global financial crises notwithstanding and depending on how long you have owned it, you can reasonably expect to sell your well-maintained home for more than you paid for it, with some caveats.

If you are unfortunate enough to find yourself receiving valuations or offers for your home of less than you paid for it, it’s time to take stock of the situation and act to make the best of it.

How can my home be worth less than I paid for it?

There are a number of reasons you might find yourself with a home worth less than you paid for it, for example:

  • you became emotionally attached to the home at the outset and paid more for it than its true market value
  • you received poor or inadequate advice about your decision to purchase the home
  • its locality has fallen out of fashion or now has some negative aspect because of changes in the area
  • an unforeseen fault has arisen that requires expensive repairs (which may have been detected by a building surveyor).

What can I do about the situation?

Whatever you do, don’t do nothing—hanging on in the hope that your property will somehow magically appreciate is just not facing the facts.

Before you do act you’ll need advice from two experienced professionals, the first a local real estate agent, who can give you current and historical information about the property market in your area.

The second valuable source of information is a financial advisor, who will look at how much you owe on your home and help you to understand the financial implications of the choices you face.

If homes in your locality have been devaluing over time then your wisest choice is probably to sell before the trend continues further.

I couldn't bear to sell my house for less than I paid for it

If that seems unpalatable, compare it with the thought of continuing to pay interest on your mortgage and outgoing costs for another year or two and then selling your home for much less than you could have today.

To sell you will need to recoup sufficient money from the sale to repay what is owing on your mortgage (as well as all applicable taxes, duties, fees and charges), otherwise your lender will not release the title of the property to the new owner.

If you decide not to sell a home that’s currently worth less than you paid for it, with the help of your financial advisor you’ll need to look at ways of offsetting the loss of potential capital gains by reducing your expenses for as long as you hold the property.

What have I learnt from this experience?

While we might like to think of our homes as investments, they aren’t really, because they do not pay an income and, unlike actual investments, few people can remain emotionally detached about them.

Most experiences, good or bad, come with lessons, if we’re prepared to recognise them.

From this experience you’ve probably learnt that, as in life, there is no such thing as a sure thing in real estate.

The most valuable lesson you can have learnt is to seek advice from appropriately qualified and experienced professionals before purchasing property.

As property experts in Adelaide’s coastal and western suburbs for forty-five years, you can trust McGrath Real Estates’s agents to provide you with informed advice about the best local property to purchase in your situation.