If you own property, you need to hold on forever. And if you can't hold onto your property forever, then hold on long enough until commission rates come down. Don't sell your home if you don't have to! Property sellers go on strike!
Thankfully, the National Association Of Realtors, Keller Williams, and HomeServices of America were found guilty by a Missouri jury for price fixing. As a result, real estate commissions should finally come down in a significant way by 2025 as the buyers agent goes away.
Hence, if you are thinking about selling in a weak market with high mortgage rates, don't. Wait until mortgage rates come down and commission rates come down to make more and save more money.
Property Sellers: Be Wise And Hold On
The housing market is still strong. If you sell today and pay the big commissions, you will likely regret your choice years from now. Instead, I would try to hold on for as long as possible.
Rents have risen at least 20% from two years ago thanks to the surge in startup jobs as well as the general recovery in the economy. I raised my rent by 10% last year, and plan to raise my rent by another 5% this year. I feel bad raising the rent hence, I'm giving her a 5% discount. I'd rather have a great tenant who plans to stay for a while than a bad tenant or one that decides to move after only a year.
Real estate prices always follow what rental prices are doing in the long run. When you can immediately receive a 4+% net cash yield on a rental property while borrowing at 3% with the potential for capital appreciation, you buy real estate.
Renters will eventually get fed up with rising rents and also seek to buy, thereby pushing property prices up even further. If renters don't buy, then there is a further upward increase in rental prices which is good for landlords.
Even in an expensive city like San Francisco, owning a property is cheaper than renting provided you have capital for a 20-30% downpayment. Property sellers need to be cognizant of the power of inflation.
Online Real Estate Companies Haven't Helped Lower Commission Rates
Even after a tremendous shift towards real estate online with companies such as Zillow, Trulia (bought by Zillow in 2016), and Redfin, it is shocking that commission rates have stayed sticky at around 5% in the major markets.
5% is way too high of a commission to charge for a median property price of $650,000 here in San Francisco for example. Realtors complain that there is no inventory, yet refuse to lower their commissions to help increase transactions. As a result, I urge all homeowners to go on strike and not sell until commissions come down to a flat fee!
The cost to sell a house is just way too high. Property sellers need to fight back against the online real estate companies that have done very little to lower transaction costs. Only Redfin has really helped property sellers save.
The Benefits Of Never Selling Your Property
1) You learn to live within your means and appreciate what you have.
It always seems to be about more, more, more here in the US and in other developed countries. A 1,500 square foot track homes in the 1970's used to be the norm. Now we're talking 3,000+ McMansions with the same number of people in the family! Perhaps it's because Americans have gotten so much larger over the years we need more space? That's what the auto manufacturers tell us at least.
2) You put pressure on oligopoly pricing in the real estate market.
It is an absolute shame that Realtors will push their clients to buy one home over another just because of higher commissions. I know of Realtors who refuse to even visit a home, even if its perfect for their client because they won't make enough commissions! We need a flat real estate commission fee. 2% sounds about right.
3) You build incredible memories of happiness.
Think back to all the wonderful memories you had growing up as a kid. Chances are, if the median homeownership duration is 10 years, you no longer have that house. Now imagine if the house was still a part of the family as an adult 25 years later. Nostalgia is happiness.
I love going back to my grandparent's house every year for my entire life because I love remembering. I love seeing the pictures of when we were kids hanging in the hallway. I love seeing the trees we planted as youngsters grow and bear fruit. Owning a forever home is not a bad idea.
4) You get to live rent-free or mortgage-free for the rest of your life.
Sure there is normal maintenance expense and property taxes, but they are a pittance compared to the cost of ever rising rents in a naturally inflating environment. My parents are living debt free, and it is wonderful for them, and for me that I don't have to worry about them financially. Now that I'm retired, I fully appreciate my rental property income that helps sustain my lifestyle. I plan on accelerating the payoff of my rental property mortgages due to the increased appreciation for cash flow.
5) You help retirees increase their cash flow.
Many retirees rely on rental property income plus fixed income to survive. Unfortunately, fixed returns from CDs and dividend yields have declined. By keeping your property off the market, you prevent one more person from owning, thereby helping out our retired landlord friends live better lives by putting upward pressure on rents. Isn't it our duty to take care of our elders? Besides, the value of rental income has gone way up because interest rates have come way down. Own rental properties!
6) You get to pass on your home to your loved ones.
My grandparents' vision was to always have their main house be in the family for us to visit, enjoy, and pass down to future generations forever. They may have been tempted at multiple times to sell for a huge profit, but I'm glad they didn't. I always enjoy going back home. It would be extremely strange to go back to a new house, or different house from the one I began visiting more than 30 years ago.
The Cost Of Selling A Property Example
Take a look at how much it costs to sell a home for $1,850,000. We're talking over $117,000 just to sell. Why would you ever sell a home when you can rent it out and just earn cash flow? Property sellers need to really list out all the costs of selling a home before proceeding. It is very vomit-inducing.
In late 2023
Never create a taxable event if you don't have to. Be like a billionaire and borrow from your equity to fund anything you need.
Please Don't Sell Your Home If You Don't Have to
Treat your property as a home first, and as an investment second. Buying a home for lifestyle improvement is the way to go.
If you're buying a place just to make money, then perhaps you should reconsider your purchase. The median homeownership duration of 5.9 years is way too little to build any real wealth.
You've got to live somewhere. Reduce the stress that comes with buying, selling, moving, negotiating, and fixing. You'll wake up 10 years from now and be amazed at how quickly time flies. Hopefully you'll not only have built a good amount of equity, but also a great amount of wonderful memories.
If you're curious like I am about the latest value of your home, check Zillow.com. I check at least weekly because their values are updated 3X a week. Just be wary of their Zestimates and study the comparable sales.
My Conversation With Attorney Mark Ketchmark Who Busted The Real Estate Cartel
Here's my hour-long conversation with Mark Ketchmark, the lead attorney responsible for busting the real estate cartel and stopping their real estate collusion and price fixing ways. I think you'll find the conservation fascinating!
After paying 4.5% to sell my house, I promised never to sell another property until real estate commissions come down further. With this landmark ruling, I believe the buyers agent will eventually disappear, leading to at least another 1% decline in real estate commissions.
Recommendations To Build Wealth
1) Explore real estate crowdsourcing opportunities.
If you don't have the downpayment to buy a property, don't want to deal with the hassle of managing real estate, or don't want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today.
Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible. For example, cap rates are around 3% in San Francisco and New York City, but over 10% in the Midwest if you're looking for strictly investing income returns.
Sign up and take a look at all the residential and commercial investment opportunities around the country Fundrise has to offer. It's free to look.
2) Take Advantage Of Low Mortgage Rates Today
Check the latest mortgage rates online through Credible. Credible has one of the largest networks of lenders that compete for your business. You can get free, no-obligation quotes in minutes. The more lenders compete for your business, the lower your rate. Mortgage rates continue to be near all-time lows. Take advantage.
Hold onto your property as long as possible! Inflation is up and to the right, and if you don't sell, you don't have to pay commissions, taxes, and fees. Check out real estate crowdsourcing opportunities to be more surgical with your money.