Selling At A Loss? Here’s What You Should Consider

You would have heard of the term ‘distress sales’. Selling your property at a loss is often an indicator of distress sales.

Take the example of Malkit Gulati.

Gulati is worried about whether he would be able to make a decent profit when he sells his house. Two years back, Gulati was introduced to a prospective buyer who was keen on buying his 3BHK unit in Delhi's Dr. Mukherjee Nagar. However, with the scrapping of higher denomination currency notes, the buyer suddenly withdrew leaving Gulati in a lurch. He is still frantically searching around for a potential buyer, he is unsure whether to lure in buyers with a discounted price or just wait.

Wait. Yes, that is the answer.

Gulati is one among many such potential sellers in the city who are facing a crisis. Over the last three years, many developments within the sector have shaped the market in a particular way. For example, a few months before the elections in 2014, prospective buyers withheld their investments turning to a 'wait and watch' policy. Unsure about the economic policies of the new government, most decided to wait till the budget for any major announcements. Many expected real estate to be a major beneficiary. This did happen. Game changers were announced, Goods and Services Tax Bill, Real Estate Act 2016 as well as demonetisation have been 'big money' moves by the government in a bid to regulate black money in the country. However, implementation of these bills will hold the key to how successful they actually are in their objective. 

Everything around real estate requires a lot of patience and while some may be planning to enter or exit the property market, these developments can affect decisions.

What should you do? Hold your property or sell? Any kind of haste with respect to property transactions can lead to what is termed as distress sales where you may have to compromise on the price, the timing, amenities or other factors.

These are some of the aspects you need to check before you make up your mind:

Opt for the alternative

Consider renting your home. Rental yields in active markets of the Indian real estate is anywhere up to five per cent. This means you can recover up to 5 per cent of the property cost that you incurred within a year’s time. The rental yield of developing localities may be on the mid to higher side while those of the developed neighbourhoods may be low because the capital values in the latter are way too high. In any case, if you are so keen on selling at a loss, why not try renting it out?

Weigh the need

It may not always be easy to hold on to the property at all times. A seller might be looking for liquidity for an emergency such as a medical need or even to finance a wedding. Usually prospective sellers wait for the most opportune time to make the most out of their property. It could be easy for you to read the market trends. Analyse how the property market has been faring in your locality. If the market is in a slump and expects better days a year or two from now, hold your property and make use of your reserve cash if you can afford to. In case of a medical need, you may have to give in to distress sales.

Avoid speculation

With the volume of money that a property commands, naturally it is prone to speculation. Nevertheless, it is always better to keep your calm and verify facts before you decide to sell. Are you trying to dispose the property because you have heard from your peer group that the locality has lost its sheen or because the market is in a slump and may not revive in the long run? Similarly, with demonetisation in place, buyers expect a huge cut in prices and are waiting for the 'right time' to buy a house. There is no denying the fact that black money did pervade the property market and has corroded the reputation altogether.

As a buyer, the best you can do is turn to a developer with a clean track record, emphasize on clean transactions and go for a project that is priced rightly and suits your need. Do not expect a property worth Rs 75 lakh to go down to Rs 50 lakh overnight. That kind of magic is just wishful thinking and is impossible considering the cost of construction and raw materials.

Advertise and 'dress up' your property

If you have to sell, you should go the extra mile to pitch it perfectly. The traditional route of banking on an agent to sell your property may not be wholly reliable. Today real estate portals such as PropTiger have a far wider reach than local brokers. If you advertise your property online, you can be sure that you are making an inexpensive yet powerful way of reaching out to a potential buyer. List your property and be transparent about the details. Do not pitch your property with unnecessary gilt and glamour. It may woo in buyers but they will eventually notice the mismatch and withdraw.

A well-kept house is a half success already. No matter what the age of your building is, a properly maintained house will always appeal to a buyer. At the same time, if you have leaky walls and unkempt premises, you are shooing away your target already.  

Think practically, quote realistically

Sachin Bhandari bought a 2BHK unit for Rs 36 lakh in 2010. A few months back he decided to sell it and tagged it at a price that his neighbour claimed was the price of the property. “Tea time discussions weighed too heavy on me and I listed my property for Rs 85 lakh because my friend and neighbour claimed he had sold off his property for that amount. His property was fully furnished and newly renovated and the location is also prime but I never received any calls from prospective home seekers. I can even lower the price now,” says Bhandari.

Properties do not move in the market because of a price you randomly quote. While many people do what Bhandari did, a better way is to approach a valuer. These days banks have valuers who calculate the value of your property depending upon realistic parameters than hearsay. It is a genuine confirmation of the price of your property and it is recommended that you quote this price.

An alternative and quicker way to assess the same is to look up the real estate portals and figure out how similar properties in your own locality have been priced. Make sure these listings are verified.  If you price it right, you can forgo the distress and just sell.