So in this case, if your valuation comes out really low, you can pay to have another one done. This typically costs around $700 to $1,000.

While this is an additional cost it could save an investor a lot of money if they then don’t have to pay the bank a higher interest rate.

Should I Just Sell The Property?

It’s common for investors to think: “Oh crap, my property has come in under value and I've lost $50k. What a dud investment … I’d better sell it and find something else.”

We get it. It can be easy to jump to a conclusion that the property is bad, and seek to sell (at least at first).

But now, what if we were to ask you this: “If the value of the property went up by the same amount ($50k), would you have sold that property?”

The answer is probably “no” (well it really should be) so why are you thinking about selling?

And the reason you wouldn’t sell is that you didn’t buy the property to make a quick buck. You probably bought it for the long term.

So if that hasn’t changed, it’s often a good idea to continue holding that property; that’s probably what you bought it for.

The thing is, if your property comes in under value, you haven’t actually felt the loss. The loss only exists on paper. Just the same as any gain … it’s only a gain on paper.

To explain what we mean by this let’s go back to our earlier example of the $1 million property dropping to $950k.

If you paid for the property (settled) and then decided to sell you’ve lost $50k because you paid the developer $1m and sold for $950k.

And on top of that, you probably lost another $50k once you’ve paid your real estate agent fee and lawyer’s bill.

So by selling the property you “crystallize those losses” and turn what was a paper loss into a real one.

But what if you decided to hold that property for the next 15 years? Chances are the market will recover and you will make back that initial loss and go on to make significant capital gains.

Then, when you decide to sell your property, you’ll likely make hundreds of thousands of dollars.

OK … So, What Should I Do?

The bottom line here is: If the market drops, the best thing you can do is hold your nerve.

Property is a long-term investment game and if you panic-sell you risk crystallizing your losses, probably beyond what your property may have fallen in value.

So, keep that in the forefront of your mind if it comes in less than what you expected it to.

If you’ve done your homework right, and you’ve bought a good investment, it’s still a good investment even if it is slightly less than what was expected.

Remember, you’re buying to hold onto that property for 15 years. It doesn’t matter what the market is doing now, or next year, or even the year after.

Who Do I Talk To About My Situation?

It’s important to speak to a professional for advice on your situation, should this happen to you.

If you are working with us here at Opes, that person will be your Property Partner.

However, even if you’re not working with us, make sure you do work with a specialised property investor company so if things do go wrong you’ve got someone to chat to for advice.

Laine 3 001

Laine Moger

Journalist and Property Educator, holds a Bachelor of Communication (Honours) from Massey University.

Laine Moger, a seasoned Journalist and Property Educator holds a Bachelor of Communications (Honours) from Massey University and a Diploma of Journalism from the London School of Journalism. She has been an integral part of the Opes team for four years, crafting content for our website, newsletter, and external columns, as well as contributing to Informed Investor and NZ Property Investor.

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