Saturday, 4 August 2018

Saturday, 4 August 2018

Figure it out

The following is a slightly amended version of an exchange that I have had with a vendor during the course of this week.

They purchased their home in France in late August 2015 for a figure of 265,000 € (inclusive of agency and Notaire fees). Fast forward 3 years and they have to sell because their circumstances have changed significantly, so they have been on the market for 2 months.

Today we have an offer for them at 242,500 € (net vendor), which they have initially refused, because they are "losing money" on the sale.

To them, the house cost 265,000 and they would effectively lose 22,500 € by accepting the offer that is on the table today. I have subsequently had a conversation with them about the real cost to them, rather than what appears on paper. If you think about it, the figures in Euros are the paper figures, and the real cost is what they paid in Sterling, and what they will get back in £s when the money is repatriated.

Looking more closely at the figures, it became evident that 265,000 € had actually cost below £200,000 (in fact £196,295) when the currency was purchased via our dedicated dealers in August 2015. Accepting the offer of 242,500 € today would yield £212,720 if they lock into a forward contract. So, rather than a perceived loss of 22,500 €, the client is now actually making £16,425 in the currency that really matters to them going forwards - Sterling!

Sometimes, even seemingly intelligent people do not see this, and we need to paint the picture for them. They are not alone, there are many out there who don't see the logic here and focus blindly on the Euro figure.

Incredible that if you take the absolute £ low and the £ high over this 5 year period there is a difference of 33.44%. That is truly massive - and really is over the 2015-2018 period rather than the whole 5 years.

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