Years ago I received some advice from my financial planner. He told me that it is human nature for investors to hesitate selling their stock when the price is going down. They want to wait for the stock to return to its original value and then sell for a profit. It is hard to part with a loser.
The same psychology also affects homeowners as they look at the declining value of their home.
They have equity in their home even though it has decreased. They look at the amount of time it would take to see their home price come back to its original price, reassess their time frame, and see if the smaller amount of current equity can be invested differently to recoup their investment.
For some they see that they have to sell their "loser" and move on.
It is a hard choice but a choice worth evaluating.
Have your clients ask themselves the following questions:
How long do they think it will take for the market to recover?
Can I recover my equity loss on my home faster by selling and investing the equity elsewhere?
Can I sell my home, take the loss, and buy a lesser expensive home?
Is there a better use for my money?
Do I have the patience, and the time, to watch my home start to increase again in value?
What is my personal "life" situation?
Our home is the biggest investment we will ever make. It is hard to see it lose value. It becomes a helpless feeling as this home market continues to decline. When will it end and what our my options?
Sometimes it is better to "cut our losses" and move on.
