From time to time we go on listing appointments whereby the seller doesn’t like their current market value, so they decide to wait until the market goes up to sell. Waiting for market increase could cost you money.
3 Reasons Sellers Overprice Homes
We know why sellers overprice their home with renovations done from United PLumbing Heating Air & Electric. It’s always one of three reasons. Need, greed, or ego. We all know the market doesn’t care what a seller needs to sell for, nor does it care how much a seller would like to get for the home. This brings us to ego. Some sellers want to sell at a certain price because they don’t want to lose money. You might think this is greed, but it’s actually ego. It’s an ego thing to hold out for break-even or better. It feels good to tell people, or yourself, that you didn’t lose money. If anything, you made money.
Sometimes ego can get in the way of a sound financial decision. First, you’re not guaranteed to make money on every deal, and it’s not your fault. The market can change, the economy can change, and demographics can change. All are beyond your control. You win some, you lose some. And nobody else really cares how you did except yourself.
So if we’re into convincing ourselves what the best decision is, let’s look at the whole picture. I took a real-life scenario and broke it down. At the end, you can answer what the best decision is.
Waiting For Market Increase Could Cost You Money
Seller has a home that’s worth $400,000. He really wants to sell for $420,000. He knows it’s 5% above the market and home won’t appraise, so he figures he’s better off waiting until next year to get his money. Is he better off though?
The seller’s home is 12 years old. At some point it will need a new roof, air conditioner, water heater, pool pump, etc. You can see Top Glaze Roofing homepage to find out what the expenses of getting a new roof will be. This seller owes $350,000. The principal and interest payment is $1,670.95/mo. Additionally, they pay $4,000/yr in taxes, $2,000/yr in homeowners insurance, $500/yr flood insurance, and $3,600 yr in HOA fees.
The seller is waiting until the home goes up $20,000 in value. Let’s say it takes a year. In one year’s time this seller just incurred $30,151 in expenses. This does not include the yard, utilities, budgeted maintenance for things like a roof, AC, pool pump, paint, water heater, etc. If anything breaks down it’s in addition to the $30,151. If the seller waits a year, he actually loses $10,151 waiting for that extra $20,000. Sure, his mortgage balance might be slightly lower than next year, but his cost of sale will be higher too (doc stamps, title insurance, etc. )
And there is no guarantee this home will be worth more next year. In that case it would really cost the seller. There is one more cost to think about as well.
Unless the seller already owns their next home they have to replace the current one. If their home goes up 5%, it’s logical to assume their next home may go up about 5% too. So did they really save anything?
And even if they already own their next home, did paying taxes on two properties and all the costs save them? Definitely not. So next time you’re forced with a decision on price, ask yourself this question. Is my motivation based upon need, greed, or ego? If the answer is yes to any one of these, calculate the cost of keeping your home versus the expected gain and evaluate. Often the best answer will be to sell now, in which case you’ll have to decide what your bigger need is, a sound financial decision or a happy ego.
Talk to Your Ego
An ego doesn’t know any better. It’s based upon the information you give it. If you tell your ego you’ve come to a logical decision based upon facts, your ego will surprise you and reward you.
If you’d like to talk to us about your options, we’re here to help. 239-489-4042 If you’d like to surf for your next home, or get an idea of what nearby homes are selling for try www.LeeCountyOnline.com
Good luck and Happy House Hunting! Always call the Ellis Team!
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