Home / Business / The trade-in as a sales tool in the real estate market in crisis

The trade-in as a sales tool in the real estate market in crisis

Трейд-ин как инструмент продаж на рынке недвижимости в кризис

Across the country in 2015, the developers have brought to market a number of interesting construction projects, and almost all at prices substantially below market, which was in Russia in 2014. And, at first glance, it is now appropriate moment for those who want to move from your old apartment to the new one. However, because of falling demand for secondary properties, sell your own apartment can be very difficult. What are the solutions to this challenge?

Secondary housing depreciates faster primary

In many cities during the years of oil abundance there was a shortage of relatively inexpensive and quality housing. However, events are developing in such a way that for the next two to three years, this deficit can be covered.

The reason for this is that entering the market, new projects are not only modern, but the fact that almost all of them large. As a result, citizens will receive not just bare brick, and the whole landscaped areas with the only begotten environment. This will lead to the fact that in major cities a substantial part of the middle class in the next few years will move to new buildings. As a result the old districts, especially those in not too Prime locations, will gradually lose their demand and, as consequence, to decrease.

So, now is the time to sell the old apartment to buy a house instead. But this is hampered by the drop in demand in the secondary market, which last year fell by one third in the capital and more than doubled in the regions, while increasing the exposure period of the sale.

Trade-in in its purest form

To solve the situation for those wishing to change old apartment to a new theory needs the mechanism of a trade-in. However, one should know that different companies mean different things. Thus, the classic trade-in, which are essentially ripoffs of the automotive market, operates under the repurchase by the developer of the old apartment with a certain discount from the market price, and this price sets in payment for the home building.

But the problem is that now such offers on the market almost no, because the netting in the narrow sense of the word rare in the current real estate market, since it implies the redemption of the existing dwelling with a substantial discount, sometimes reaching up to 30%.

The reason for this is that the developer is unprofitable to keep on the balance of such an asset that we need to sell in a stagnant market. Moreover, not all construction companies are now available to Finance such an operation. Indeed, in the priority cash flows of any developer its main workflow – construction, as well as service his Bank loans.

On the other hand, owners of apartments in the secondary is also not interested in discount 30%, 40% and sometimes 50% of the value of their property. And if the car owners are willing to accept the loss of 100-200 thousand rubles at the exchange of the old car for a new one, in real estate we are talking about a much more impressive amounts.

Analog trade-in

The majority of developers under the mechanism of the trade-in mean more, namely, two interconnected rooms, which include assistance in implementation of housing in the secondary market, the installment and implementation of the transaction on direct purchase of land. For the client it in its pure form means working on a “one window” and gives you the opportunity to save a minimum Agency fee of realtors.

This mechanism has another advantage: the special conditions for the purchase of new buildings. This means booking apartment for a relatively long period of time (from one month to three months) when saving pictures.

And if earlier these schemes were not particularly widespread, due to the crisis the number of such proposals from developers has increased dramatically – some experts say that the increase in the number from 30 to 300%.

The price adjustment

However, the trade-in, albeit in analog form, is applied not for all new buildings. And in this case, to sell their apartment themselves. It should be noted that the secondary market is in a state of deep stagnation, and supply of it exceeds demand. And in this situation, virtually the only selling tool is price. Overpriced offers are absolutely likely to implement. It is therefore important to set acceptable current market price and be prepared to discounts.

So, if the price of the apartment is one of the lowest in the area, then it will be calls and viewings. But if the subject is at least already on 6-th row in the databases of real estate when you sort by price, calls it receives at all. On the other hand, encouraged by the fact that the sellers of new buildings, too ready to discount, and in some cases can give a discount, which offsets the loss in value when selling their own homes.

Free installment for the rich

But even more than the market price sell the secondary object can take several months. To reduce the risk of losing an interesting apartment in a new building, you can use the installment developer.

Unlike mortgages are often interest-free installments, even though such conditions are only available in limited time. In most cases, the installment plan is only valid until the commissioning of the house, but in the meantime, will likely be able to sell the old apartment.

Among the shortcomings of this mechanism we note quite a large initial fee that usually is about 50%. Thus, the option of installment for those who have in addition to the apartment you have your own money.

The Bank’s support

There is a possibility to buy an apartment in a new building and only after that to engage in the sale of second homes. For this you need to make a loan against your own property. But we must bear in mind that the Bank will be able to lend You only on the equivalent of no more than 70-80% of the appraised value of the apartment. This makes this method suitable for those who choose a cheaper new or old apartment (again) has more substantial tools.

Also, this variant can be combined with a standard installment: to pawn his property, to make the money for the new building and the balance to pay after the sale of the old residence.

Of course, it should be noted that this mechanism has not received a substantial distribution. This is due to the fact that citizens are reluctant to lay flat, because for its subsequent sale will need each step to coordinate with the Bank.

When money is tight

Another difficulty occurs when the secondary sell flats cheaper than purchased new. In this case, you must contact the mortgage. If a citizen has money for the first payment for a new apartment, he just buys a new apartment with a mortgage, while exposing for sale of his apartment in the scheme of netting. After the sale of the apartment, the money will go to pay off the mortgage.

When the buyer has only secondary apartment, but have no own funds, when the registration of a Bank loan, you need to specify the selling price of their real estate as down payment. To receive the funds are a loan only after the sale.

Thus, in our view, every day will be more citizens who want to change the secondary housing to an apartment in a new building. And therefore, popularity of various tools that would help to make the transaction as quickly as possible and without big discounts will increase. As a result the winners will be those developers who will be able to offer our customers simple ways to make such an exchange.

Check Also

UK house prices fall by 1.8% during year amid higher mortgage costs

Property market weak, says Nationwide, which expects prices to remain flat or drop slightly in …