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Why Now Is The Best Time To Sell With Owner Financing
One of the hardest concepts to grasp is why you can make more money by selling at a discount now rather than waiting to get a better price. The reason concerns the time value of money.
This is an example of the time value of money at work. Last year, a real estate agent listed a house in my neighborhood for $950,000. Even at the time, that seemed like much too high a price for the immediate area. For more than a year, the house stayed on the market.
PRICE REDUCED was added to the sign in front of the house. Then the prices started to go down, slowly and steadily as the house didn't sell.
$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.
However, the real estate agent advised the seller that it would be a mistake to owner finance, because the seller would have to take a discount on the price of the property.
Finally, a SOLD sign appeared. By this time, the asking price had been reduced to $725,000. Considering that the original price was $950,000, the difference was $225,000. This is a quarter of a million dollars. And this assumes that the buyer was willing to pay the full $725,000.
Add to that, the seller paid mortgage, taxes, insurance, and maintenance on a vacant property for more than a year. The question then becomes: How much did the seller lose because the seller wouldn't discount a note?
When times are tough in real estate, the common solution is to do what the real estate agent advised the seller. Keep reducing the price until someone finally buys.
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.
About the Author Learn why owner financing is the most reliable way to make more money, sell quickly, and increase cash flow. Find out how to think about money with No Money Limits.
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