Usually, the best way to sell a house is to be patient, spruce it up, list it at the right season, and wait for a great offer. This advice is perfect for most situations. Nevertheless, there are times when not changing that plan will end up costing you more. In this case, the cost of holding, the stress, the uncertainty, the opportunity loss through a long sale are so high that financially, it would have been wiser to accept a quicker, albeit lower, offer. Your mode of calculation depends on your situation.
A person who is comfortable with time, whose property is in the immediate handover stage without any work, and is living in a market with rising house prices, can expect an excellent result from a standard listing. Meanwhile, someone who is a seller of a house, who is paying for the mortgage of two houses simultaneously, has a house that needs a lot of work, is getting a divorce or settling an estate or is under financial pressure that the holding costs really hurting is doing a completely different type of math.
The Real Cost of Holding a Property You Need to Sell
Most people greatly underestimate the amount of money it truly takes to keep a property throughout a traditional sale period. Of course, the main expenses are mortgage payments, property taxes, and insurance, which keep coming even if you’re not living in the house. But on top of that, there are also much less obvious costs that you pay alongside your utility bills on a property that you have to maintain at a livable standard, lawn care and regular maintenance to keep it looking good for showings, and also any costs for staging or preparing the house before placing it on the market.
A traditional sale in a reasonably active market can go from listing to closing for three to six months easily. In a slower market or with a property that has difficulties, it can take much longer. If the average monthly carrying cost is only $1,500 to $2,500 and this number can be much higher depending on the property and the location, then a six-month sale process translates into $9,000 to $15,000 worth of costs that come straight off your net proceeds.
Distressed Properties and the Renovation Problem
Properties that need major renovations present a distinct financial challenge that often results in the quick sale option being very attractive. Traditionally, distressed properties are sold as is at a heavily discounted price, which definitely acts as a buyer magnet however, it is a difficult task since the majority of buyers who arrange their mortgage through a lender get restricted, as the lender usually does not allow properties in poor condition to be used as collateral. Besides, the other option would be to carry out the renovation and then sell the property. Even if renovation looks like a less costly option it may not be the case.
Life Events That Change the Financial Equation
Certain life events can drastically change the financial reasoning behind selling a property slowly vs selling it quickly in ways that justify open mention. Divorce is probably the biggest example of that. If the couple’s house has to be sold as part of their divorce settlement, each month the sale is postponed is a month during which the ex-spouses are still financially connected, have ongoing carrying cost disagreements, and their ability to emotionally and physically move on is being delayed. From the emotional perspective, that drawn-out legal process can even become the financial aspect one trying to delay the case and negotiation will actually incur more penalties and a fast sale that enables closing the chapter in a clean way is generally the right option even if the overall matter is a bit lower.
Job relocation with a tight start date is another situation where the speed premium is real. Carrying a vacant home in a city you’ve already left while paying rent or a mortgage in a new one is an expensive proposition. Companies like Fair Deal Home Purchasers specialize in exactly these kinds of situations, offering cash purchases that close on a timeline that works for the seller rather than the market, which can be the difference between a clean financial transition and months of painful double-carrying.
When the Market Itself Favors Speed
Market conditions can have several unexpected and overlooked effects on such calculations. If it is a bear market or prices are falling slowly every month(time is really your enemy) Some time ago a house for sale was advertised at $350 000. But after 4 months in a declining market, it would probably be sold at $325,000 or even less. So the “waiting” strategy which works in an appreciating market would actually cause you a decline in a losing one. Changes in interest rates have their effects too. A sudden increase in rates means that there will be fewer qualified buyers, financing contingencies will not only become more frequent but also more complicated and even initially stable deals are the ones that are falling through at higher rates. More deals falling through will mean that there will be a longer time on the market, higher carrying cost, and greater uncertainty.
Making the Decision With Clear Numbers
Anyway, the easiest way for you to figure out if a quick sale or a conventional listing is the best for you, is to work out the real figures that match your property situation, instead of relying on your instincts of which method will bring you better results. You should start with a realistic estimate of what you will get from a traditional sale – that is not the advertised price, but what the buyer is likely to pay after bargaining, less agent commissions, closing costs, and any repair requests from the inspection.
Then, you subtract the holding costs for a timely sale. Next, you compare that net figure with a cash offer that is based on the current condition of your property and the quick sale premium that the buyer is including. The difference between those two figures is what you are really deciding on and it can be very small in a lot of cases – especially those involving distress repairs, changes in lifestyle, or poor market conditions – in fact often it is entirely in favor of a quick sale.