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Opportunity Costs – In the Realestate Market

Opportunity Costs - In the Realestate Market

Opportunity Costs

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:

now is the time to sell your propertyif 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.

Cost Effort Risk diseOpportunities 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

(4) Comments

    • Perfect Homes (Chiang Mai Properties)

      on   said 

      Hi David,
      Thank you for the positive comments we do try to keep the articles coming as often as possible.
      Have a great day in Chiang Mai!

      Reply
  1. If you want/need to sell your property within an acceptable time span then the current market value should be adhered to. Personally, to reach a quick sale I prefer to sell slightly under the market value. If your property displays (exceptional) extra value all the better but in that case you might want to take some more time to find that special buyer who would fall in love with your property. Notwithstanding, I do believe that a property should be no longer on the market than 6 months. If it stays much longer on the agent’s listing potential buyers clearly think that the price is either too high or they start to wonder if there is something wrong with your property.

    Reply

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