Top 5 Reasons for Selling Property Below Purchase Price

5 Reasons WHY people sell below the price they bought (property lah)

Someone said, “I am willing to sell lower than the price I bought if the investment went wrong”

This was a valid statement by someone who was maybe very wealthy, so just wanted to show how rich he was. It’s not a positive statement because it’s not a positive one. Selling lower than the price we bought simply meant losing money. Well, if losing money still proceed to sell, then maybe the seller is thinking about property just like the stock market; cutting loss.

Property investment is not the stock market yeah. In the stock market, for a typical investor who is investing RM50,000, cutting loss 10 times may meant losing RM10,000. Means he cut loss at the 20 percent mark. He will not lose more than that. In the property world, selling below the price we bought is usually a very negative sign about that property. So, it’s highly unlikely to be a loss of just RM10,000. Here are 5 reasons why one would be willing to sell the property they bought at a lower price than what they paid for.

#1 – Grossly overpriced in the first place

In other words, the buyer made a huge mistake in the first place. Maybe did not check what are the prices for a similar kind of property. Maybe this was bought via some super property expert whom he has paid many thousands to join and listen to. Ultimately the one who gained the most from such deals could be the one who arranged for such deals in the first place.

Or the buyer could have bought it because the sales person was just too good, too convincing and too persuasive. So, he got ‘swindled’ in this case. By the way, all these reasons above is all about the BUYER and has nothing to do with the property or property investment. Please do proper homework before we buy or else we will end up like this and then you will insist it’s the property’s fault… or property investment’s problem.

#2 – Owner in financial distress

If the owner is in financial distress due to any issue at all then chances are they will be willing to sell 20 or 30 percent below market to make it the most attractive property on the market. If price is lowered just 5 percent or 10 percent lower, the potential buyer may still want to decide and compare. In fact they may even negotiate with other sellers for that extra 5 percent discount and suddenly the price is now the same. Thus, if there’s a need for money, then the quicker the property is sold, the faster the funds could come in and help in the current financial distress. So there is the potential to sell below the price they bought.

#3 – Owner is leaving Malaysia or at moving elsewhere

Just recently there is this transaction which happened for a very good price because the owner was moving out of Malaysia. Read here: The Case for a RM900k condo which is great value. When the owner is moving out of Malaysia, it it will be very inconvenient to come back for any documentation. So, it’s best to conclude everything asap. This is what the motivation to sell is much higher. Flying back a few times just to conclude this transaction will cost a lot too actually. So, if you found such owners that you know of, rest assured the price will be an attractive one. Even if not overseas, driving a few hours to and fro is not a good option too. This is why there is a potential for the seller to sell below the price they bought.

#4 – There are a LOT of similar properties in the market

Imagine a new development which had just been completed and now there are suddenly a few hundred owners all wanting to sell. Well, when the supply is a lot, the price would have to be attractive in order to attract potential buyers who have a lot of choices currently. Now imagine maybe a few other similar properties all within minutes away where the owners are also looking to sell their units. Of course this will cause a lot of pressure for all the owners. This is why if the seller could not hold, then they could be forced to sell their property below the price they bought.

#5 – When the time to sell is during a market slowdown

When the economy is not doing well, buyers are more cautious. During this time, buyers prefer to wait for more concrete signs of recovery prior to stepping into the market. This will shrink the number of potential buyers. Property market always have to rely on the economy. Without continuous economic growth, there is no employment growth. Thus, any seller selling during the wrong market timing will have no choice but to sell lower in order to attract potential buyers. This could even include selling below the market price.

Happy understanding that there are not many reasons why property prices are sold below the price they were paid for. On normal times, with normal increase in property price and sellers buying without overpaying, by the time they want to sell, that property price would have already appreciated. It could just be a small one but chances are prices would have increased. Feel free to take a look at the property price across as long as the stats could show. If price is below 0 (zero), that means price decreased.

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