To anyone who has ever studied basic economics, the concept of opportunity costs is a fairly fundamental principle.
In short, these are the benefits you forgo if you don’t use your capital (investment monies) wisely and to its best advantage.
Perhaps some examples can best demonstrate these costs in a real estate context:
if you own a house or condo in Chiang Mai and wish to sell it, but don’t price the property realistically and it takes, say, 3 years to sell, for that 3 years you have foregone the opportunity to better deploy your capital to obtain higher returns. By simply sitting around waiting for that special purchaser, other investment opportunities have passed you by…
in a similar vein, let’s assume you bought your house or condo for Baht 10M and it is now listed for sale at Baht 10M (slightly above current market value). If you have an offer at, let’s say Baht 9.6M, but flatly refuse to take it as you wish to avoid making any loss, no matter how small—thereby causing the purchaser to change his or her mind then, again, you are foregoing the opportunity to do something better with your money but cutting your losses and moving on
Re-investing your money does not, actually, have to be into real estate and you might find that buying gold or currencies or stocks will yield better results than simply hanging on and hanging on hoping to a achieve a price for your property beyond market levels or fighting for that last satang to go towards paying the ex-wife or due transfer taxes!
Yet you would be surprised at just how many people become so entrenched in their opinions (often over relatively small amounts of money), and totally lose sight of the bigger picture with regard to deployment of their hard-earned finances.
Opportunities are always there to be taken. But the opportunity costs of not taking them or waiting in perpetuity for that coveted special purchaser will far outweigh the benefits of detaching emotions from the sale of your real estate asset(s).
What do you think? Should you wait and wait until your achieve the price you want for your property—even if it is far above current market levels? Or should you ever take a loss on a property sale?
Let us know, we’d like your opinion.
Perfect Homes is a leading Chiang Mai real estate agency with extensive experience in the city, regionally, nationally and internationally