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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.

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 strongly advised the seller not to owner finance because it would mean taking a discount on 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.

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 real estate agent was simply following the most typical advice for sellers in difficult markets. Keep reducing your price, so that someone will eventually buy.

As a matter of strategy, there is a much better solution. If the seller had agreed to owner finance, it is very likely that the house would have sold a year earlier than it did. What is even more ironic is that the real estate agent would have earned a higher commission. The moral of this story is that simply reducing your asking price is not the best solution. You owe it to yourself to find out why owner financing is a better strategy than reducing prices

Article Source: http://www.uberarticles.com/articles

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