When making decisions related to preparing and selling your property, it is vital to calculate your carrying costs. Carrying costs are all of the expenses you incur when you own property; examples include mortgage payments, property taxes, insurance payments, utilities, HOA/Condo fees, home maintenance and repairs.
Calculate each monthly expense and add them together. If you are finding it too burdensome to pull together all the numbers, figure 1% of listing price as the monthly price tag to own a house.
Remember unforeseen expenses – or what I call budget busters. Although we do not know what the future brings, unforeseen expenses are typically large and always unwanted.
Keep the total number front and center – etch it into your mind because carrying costs affect your equity. Consider how much your house is costing you from the time you think about selling until it sells. In other words, what are you losing each month by owning your home?
When you seek professional advice on what you could do with your house to attract buyers, consider your monthly expenses. Translate the professional’s fee into the equivalent amount of time in carrying costs.
For example, if your house will list for $200,000, estimated carrying costs are $2,000 per month. A quote for expert advice of $1,500 converts to three weeks of carrying costs.
In this scenario, if your house sells just three weeks earlier than it would in its current condition, you will recapture your expenses. Your Realtor® will confirm that paying for professional advice clearly outweighs the expenditure.
A common reaction is, “I want to wait three months and try it on my own.” A few things result from that decision: you will spend $6,000 in carrying costs ($4,500 more than the $1,500 quote inthe example), you will lose your chance to make a first impression, you will turn away buyers and you may consider a price reduction (significantly more than that $1,500 quote).
You can see in these examples how the sale price of your house is not the bottom line. Each month your property sits unnoticed, you accumulate expenses and eat into your equity. Each price reduction further reduces your investment value.
The first step to secure your equity is to retrieve your carrying cost calculation. Use this number to guide decisions based on what will provide the best return on investment and attract the largest buyer pool. Also, it is very important to trust your Realtor®’s guidance when they bring you what they feel is a respectable offer. Follow their advice for negotiating the best deal possible.
Compare the difference between asking price and a negotiated offer with your monthly carrying costs. Remember how much you will lose each month by keeping that property on the market and hoping for another buyer with a better bid.
If the proposal is reasonable, accept it and move forward with a clear mind that you preserved your investment.
©2016, Mindy Abramson, CSP, all rights reserved