The Cost of Waiting

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“He who hesitates is lost.” This proverb has been demonstrated time and again during my 23 years of real estate experiences with sellers and buyers.

Here are some of the potential financial consequences for sellers who delay getting their houses to market.

1. Mortgage rules or rates might change. Although interest rates have remained low, the rules governing borrowed money have changed. The direct impact for sellers is that their houses may no longer be affordable to as deep a buyer pool. What was previously attainable to buy may now be out of reach for many Canadian consumers. We know that when rules or rates are changed the impact on housing often means a reduction in house values, sometimes as much as 5%. That could mean lost equity of $15,000 for a $300,000 property. This might not be the worst of it either because, whenever mortgage rates do increase, there will inevitably be higher carrying costs for consumers. For example, a 1% increase in rates on a $200,000 mortgage will mean an extra $2000 in financing costs per year. If you carry the mortgage for 5 years, that amount becomes $10,000! For most people, that amount is a heck of a lot of money, don’t you agree?

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2. Lost marketing time. The longer a property sits for sale on the market the lower the price the vendor will see. This is the ‘stale bread’ principle of marketing. No consumer will go to the bakery and pay full price for a loaf of baked bread that is a week old. What does this mean to a homeowner? Buyers start to imagine that there must be something wrong with a house that languishes for sale on the market, even if there is nothing wrong with it. So for every extra month of marketing time an owner might expect to lose another 2% of value each month. Sixty days additional time on market might cost a homeowner 4% of that $300,000 home value or $12,000.

3. More competition. Often sellers will tell me that they’d prefer to wait until spring to list their houses. The grass will be green, the trees will have leaves and the flowers will be in bloom. The fact is that most sellers think this way and flood the marketplace in April or May instead of taking advantage of reduced inventory supply in the months of January and February. When inventory increases in the spring and demand remains unchanged, house prices diminish. They can lose another 3% of their value or $9,000 on that $300,000 home.

When a homeowner calculates and adds these costs together there is the potential to lose $46,000. Except that these are only a few of the possible examples of the costs for waiting to list one’s house on the market. There are other potential costs that should be considered. And even if I am only half right, losing $23,000 of value is still a large and bitter pill to swallow, don’t you think?

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To learn more about how I can help you avoid these pitfalls and keep more of your saved equity in your hands, give me a call at 519.821.6191 or toll free across Canada at 877.497.8975

Posted from WordPress for Android by Carlo De Castris CC

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