Time is Money
Research shows the largest factor in determining the price of a property is the number of days your property has been on the market for sale. Days on the market are your enemy! Like toxic Ultraviolet sun rays on your skin, the longer you are exposed, the more harmful they become. Every day your property is on the market, it depreciates in value, driving down the sales price. Days on the market are expensive. When your property has been on the market for a prolonged period, not only does it suffer from a negative perception, but there is an inherent cost associated with the accumulated days. Each day it goes unsold, you are most likely paying the mortgage along with the cost of upkeep, real estate taxes, and insurance. These costs add up to nearly 10% of the value of the property on an annual basis. If the property is vacant, it is more likely to deteriorate and drive the value down even further. Sellers also must consider the time value of money and the loss of opportunity by having funds tied up for a long period.
Days On The Market
Cost to Carry
Sellers must recognize that the longer a property goes unsold, the less a Seller will realize from a sale. Selling a property today for $500,000 is better than selling the property a year later for $550,000. When a Seller considers the cost to carry the property, the decrease in the value of money over time is a lost opportunity by not being liquid. The average cost to carry a property is nearly 10% of the value of the property annually, considering, mortgage payments, taxes, insurance, utilities, and upkeep.
Cost to Carry A $500,000 Property for 12 Months
*Calculations based on $3500 Monthly Mortgage Payment & $1500 Monthly Upkeep (Taxes, Insurance & Maintenance)
Disappearing Equity for A $500,000 Property Over 12 Months
*Value decreases over time. The best time to Auction is in the first 60 days of placing the property on the market.
Best Time To Sell
Statistical data indicates that the highest amount of interest in a newly listed property is in the first 30 days of when a property is first placed on the market. The pricing of a property is the single most important item to consider when selling real estate. It is extremely important that the property is priced right when first placed on the market to maximize interest. The location and condition of the property are important factors in determining the price, however, the right price is always the determining factor that will attract buyers.
Real Estate Investors, Builders, and Home Flippers fully understand the urgency to sell an investment property quickly. Every single day that goes by without a sale and a quick closing decreases the profit an investor can earn due to the cost to carry the property. Loan fees, real estate taxes, utilities, etc, all add up fast and a property sitting on the market for a long time will turn a profitable deal into a loser for the investor. The longer an investment property goes unsold, the less profit the investor will earn, if any profit at all!
If a property is vacant, Sellers must recognize that the property can and will deteriorate very quickly, driving any potential sale price down. Vacant properties are also prone to break-ins and vandalism. A small problem such as a leaky toilet, in a vacant property, can turn into a flood resulting in major damage and cost to repair. The cost to carry a vacant property while it is deteriorating will drive the potential net proceeds from a sale down 20% or more annually. Vacant properties should be sold quickly to preserve value.
Selling Real Estate can be a difficult process for some Sellers because they may be too emotionally attached to a property. This can cause a Seller to hesitate and lose out on the best opportunity to sell the property. Human emotion is a factor that can outweigh a prudent business decision. To maximize value, emotion must be separated from the business decision process.