Selling a House at a Loss: A 17-Month Ordeal
After 17 long months, I finally sold my house, but at a significant loss. I want to share the details of how much money I lost in this transaction.
Initial Investment (2018)
My total initial investment in the house, purchased in 2018, was approximately 2,480,000 yuan (RMB). I don’t remember the exact amount of the down payment. This amount comprised several factors:
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Property Price: The invoice price of the property was 2,000,000 yuan.
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Parking Spaces: Two parking spaces cost 120,000 yuan each, totaling 240,000 yuan.
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Basement: A basement added another 40,000 yuan.
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Taxes and Fees: Taxes and related fees amounted to around 30,000-40,000 yuan.
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Renovations: I invested in high-quality, insulated windows for the balcony and an additional small balcony, increasing the usable floor space. The basic renovation, while not luxurious, was functional and added to the overall cost.
Considering the initial cost plus mortgage interest payments from the past years, the total capital investment was about 2,480,000 yuan. Most of the early mortgage payments consisted of interest.
The Selling Process and Loss
After a protracted negotiation spanning 17 months, I sold the house for 2,150,000 yuan. Last summer, I rejected an offer of 2,400,000 yuan, hoping for a better price, but the market continued to decline. I also paid a 10,000 yuan commission to the real estate agent.
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Sale Price: 2,150,000 yuan
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Agent Commission: 10,000 yuan
Adding in the cost of capital (estimated at 3% per year) over seven years (approximately 420,000 yuan), the total loss amounted to a substantial amount, likely hundreds of thousands of yuan. I effectively lost my entire down payment.
Reasons for Selling Despite the Loss
Many people wonder why I would sell at such a loss. My reasoning was based on the following:
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Financial Burden: The house was creating a financial burden with the ongoing mortgage payments.
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No Cash Flow: The property was not generating any income.
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Rental Market Concerns: Renting out the house could potentially lower its resale value, as it would no longer be considered "new" with no one having lived in it.
I needed to alleviate the financial pressure and sell the property.
Changing Demographics of Buyers
During the 17 months of trying to sell, I observed a significant shift in the type of people interested in buying my house.
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Original Buyers (2018): When I initially bought the house in 2018, the other buyers were primarily local business owners, civil servants, and professionals—individuals with stable incomes and purchasing power.
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Current Buyers: The current pool of potential buyers primarily consisted of small business owners, such as restaurant owners, wedding business operators, and auto parts dealers.
This indicated a shift in the property's appeal from higher-income individuals and families to those with comparatively lower incomes. The higher-income brackets no longer valued the property, leading to a price decline. Since those with lower incomes have limited spending ability, they could not offer higher prices. Fearing further depreciation and potential unsellability, I decided to sell the house quickly.
Farewell and Reflections
After a brief 20-day stay in the newly renovated house, I bid farewell to it. Reflecting on the experience, I gained deeper insights into the economy, particularly the challenges faced by third- and fourth-tier cities in my home province of Shandong compared to thriving areas like Guangzhou and Shenzhen in Guangdong.
Advice for Those in Similar Situations
While I remain optimistic about China's long-term economic prospects, I am less confident about the growth potential of smaller cities.
My advice to those living in such areas:
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Embrace Opportunity: If possible, consider relocating to larger, more dynamic cities with better opportunities.
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Don't Be Sentimental: Avoid being overly attached to assets in smaller cities and be prepared to sell when necessary.