Even though it seems counterintuitive, you can often make more money by selling at discount now than you can by waiting for a better price. This is based on the concept of the time value of money.
A prime example is a property just down the street from where I live. The house was on the market for more than a year. The real estate agent first listed the price for a whopping $950,000. It was clearly overpriced.
The house didn't sell. Then the first PRICE REDUCED sign appeared and the steady decline started.
$950,000, $929,000, $899,000, $869,000, $849,000, $799,000, $780,000, $760,000, $739,000, $725,000
As soon as the prices started to go down, my husband wrote a letter to the seller. He asked if the seller would be willing to take a note to sell the property. In other words, he asked if the seller would be willing to owner-finance.
The real estate agent intervened to convince the owner that owner financing would require the owner to discount the property. On the agent's recommendation, the owner was unwilling to consider owner financing.
More than a year later, a SOLD sign finally appeared. Let's assume that the buyer paid the lowest asking price of $725,000. This means that the seller's asking price went down from $950,000 to $725,000. This is a difference of $225,000. A quarter of a million dollars.
While the house was unsold, the expenses on the property continued. The seller had to make mortgage payments, pay taxes and insurance, and maintain a vacant property for more than a year. This leads to an important question: How much of a discount in price did the seller take because the seller was unwilling to discount a note?
The strategy the real estate agent advised is the typical solution for tough times. Keep lowering your price, until someone will buy.
The fact is there was a much better solution to the problem than simply reducing prices. If the seller had agreed to sell the house with a note, it is very likely that the house would have sold months before, and the seller would have made more money on the sale. The real estate agent would also have earned a higher commission. The point of this little story is that a strategy of reducing prices simply means that you will get less for your property. Before you agree to a PRICE REDUCED strategy, take the time to understand why owner financing with a note can be a much more profitable way to sell your property.
A prime example is a property just down the street from where I live. The house was on the market for more than a year. The real estate agent first listed the price for a whopping $950,000. It was clearly overpriced.
The house didn't sell. Then the first PRICE REDUCED sign appeared and the steady decline started.
$950,000, $929,000, $899,000, $869,000, $849,000, $799,000, $780,000, $760,000, $739,000, $725,000
As soon as the prices started to go down, my husband wrote a letter to the seller. He asked if the seller would be willing to take a note to sell the property. In other words, he asked if the seller would be willing to owner-finance.
The real estate agent intervened to convince the owner that owner financing would require the owner to discount the property. On the agent's recommendation, the owner was unwilling to consider owner financing.
More than a year later, a SOLD sign finally appeared. Let's assume that the buyer paid the lowest asking price of $725,000. This means that the seller's asking price went down from $950,000 to $725,000. This is a difference of $225,000. A quarter of a million dollars.
While the house was unsold, the expenses on the property continued. The seller had to make mortgage payments, pay taxes and insurance, and maintain a vacant property for more than a year. This leads to an important question: How much of a discount in price did the seller take because the seller was unwilling to discount a note?
The strategy the real estate agent advised is the typical solution for tough times. Keep lowering your price, until someone will buy.
The fact is there was a much better solution to the problem than simply reducing prices. If the seller had agreed to sell the house with a note, it is very likely that the house would have sold months before, and the seller would have made more money on the sale. The real estate agent would also have earned a higher commission. The point of this little story is that a strategy of reducing prices simply means that you will get less for your property. Before you agree to a PRICE REDUCED strategy, take the time to understand why owner financing with a note can be a much more profitable way to sell your property.
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