- Insider Real Estate Secrets
- Posts
- Why listing your home for sale carries risk
Here's what you'll find in this issue:
Unlock the Secrets the Pros Use… But Never Talk About
In this weekly email newsletter, our goal is to help you sell your home for more money, buy a home for less money, and to use real estate as a tool to build long-term wealth.
As a real estate broker/agent and investor here in Northeast Ohio for over 30 years, I’ve been involved in well over 1,000 real estate transactions.
I’ve owned and managed commercial real estate, apartment buildings, multi-family homes, single-family homes, manufactures homes, and land.
I’ve made every mistake you could possibly make and have learned many valuable lessons. Lessons we’ll be sharing in future issues of our weekly Insider Real Estate Secrets newsletter!
One of the most important lessons is to…
Think Like An Investor When Buying or Selling a Home!!!
Yes, it’s can be hard to think like an investor when you’re buying or selling a home for your family. Our homes are an incredibly important part of our lives.
We have some of our best (and most difficult) life moments in our homes, so it’s very easy to make real estate decisions fueled by emotion.
These emotional decisions can become costly when you’re dealing with one of your most valuable assets, which is why it’s so important to view everything from an investor’s perspective.
This recommendation applies to anyone who is thinking about buying or selling a home, not just real estate investors. In fact, a great question to consider as you make real estate decisions is:
What would Warren Buffett do in this situation?
This question gives you the opportunity to shift your perspective in a way that will help you see things accurately.
In this weekly email newsletter, I’ll be sharing many investing stories and lessons learned with the hope that you’ll use what I share to your advantage.
So, let’s dig into the ONE THING the best investors in the world always do, which is to evaluate your risk before taking any important action.
Why Listing Your Home for Sale Carries a Great Deal of Risk
You may not realize this—many homeowners don’t—but listing your home for sale carries a great deal of risk.
The two BIG risks you face are:
Your Home Sits On the Market for Weeks Without Selling.
Your Buyer Backs Out of The Agreement Before Closing.
The reason why these two issues are very risky is because both situations end up costing you a lot of money.
As a general rule, the longer your home sits on the market, the less money you’ll make on your home sale.
This is because when a buyer does finally make an offer on your home, it WILL be a lower-priced offer.
To see why, put yourself in the buyer’s shoes and consider what you would do if you wanted to make an offer on a home that’s been on the market for several months without a sale.
Would you offer the seller anything close to their list price? Probably not.
This is why it’s so costly to have your home sit on the market without selling. It's hard to put a dollar amount to this cost, but let's say you end up selling your home for 5% less than you would have, which is a very conservative estimate.
For a home valued at $350,000, a 5% loss would be $17,500!
As your home sits on the market, you'll still be paying your mortgages, taxes, insurance and other expenses.
Let's say that your monthly household expenses are around $2,000 a month and it takes you four months to finally sell your home.
This loss ends up costing you another $8,000 that could have been invested into your new home.
Let’s take this one step further and think about how most homes are actually sold, which is to list your home with a real estate professional.
Yes, many people try selling their homes on their own as a ‘For Sale by Owner’. When their homes don’t sell, they usually end up hiring an agent to help them finally get their home sold.
And what many real estate professionals don’t want you to know is that this then means that hiring a real estate professional to sell your home also carries a great deal of risk.
If your agent isn’t able to sell your home within the first few weeks, you’ll be in the same costly situation where you’ll end up selling your home for less money.
This risk is magnified because many real estate professionals require you to sign long listing agreements.
So, if your home doesn’t sell, you’ll be trapped in this longer listing agreement with an agent who isn’t able to sell your home for the highest price possible.
When I decided to start selling homes again, I wanted to ensure that we helped our clients make more A LOT more money with their real estate transactions. To do this, I worked with some of the best agents in North America to create a new way of selling homes designed to sell homes in just 7 days with multiple offers.
The reason why selling your home in 7 days is so important is because it reduces your primary risk!
And guess what having multiple offers on your home does?
It protects you from the second BIG risk you face…
Your Buyer Backs Out of the Agreement Before Closing
You may not believe this, but a very high percentage (9-10%) of buyers in Northeast Ohio are now backing out of their purchase agreements before closing.
This happens for several reasons including home inspection issues, problems with the buyer’s financing, appraisal issues, and buyer remorse.
If your buyer backs out of the purchase of your home, it ends up costing you in two ways:
You lose very valuable market time requiring you to continue paying your mortgages, taxes, insurance and other expenses. In the example included earlier with total monthly housing expenses of just $2,000, you’d end up losing over $4,000.
The possible impact this could have on the final sale price of your home.
When a home comes back on the market, it tends to raise a red flag to future buyers, even if the issue wasn’t with the home.
Many buyers stay away from homes that come back on the market because they think there’s an expensive issue with the home.
Guess what will happen if buyers stay away from your home?
It will sit on the market, which could negatively impact the final sale price of your home.
This is why it’s so important to structure your home sale so that you have several offers from different buyers. If your first buyer backs out, you can move forward with the next highest offer.
The BIG Decision - Should You Buy or Sell First?
If you’re thinking about up-sizing or downsizing from your current home, one of the important decisions you’ll have to make is whether you should sell your current home, or buy your next home first.
And the answer to this BIG question is… it depends on your individual circumstances and what’s going on in our real estate market.
Here's a quick guide to help you decide:
It Might Be Best to Sell First If…
You Need the Proceeds for Your New Purchase:
If your down payment on your new home depends on the equity from your current home, selling first is usually the safest bet.
You may be able to sell your home and negotiate a rent back period giving you the ability to stay in your current home for a longer period. This obviously depends on your buyer and the timing requirements for their move.
Another option could be a special financing program where you borrow some of your equity for your new home purchase. This temporary loan would then be paid off once your current home sells.
It's a Buyer’s Market:
If homes are selling slowly, it may be better to sell your current home first rather than risk carrying two mortgages.
Another idea, which is certainly a little self-serving, is to use our 7-day guaranteed home sale program! With this new program, you will sell your home for the highest price possible with multiple offers in 7 days, or we’ll sell it for FREE!
Risk Aversion:
Selling first removes the financial pressure of possibly having to make payments on two properties at once.
You Want More Negotiating Power:
With cash in hand from your sale, you’re in a stronger position to negotiate the price of your new home. This means you’ll be able to buy your next home without having a contingency for the sale of your current home.
This will make the offer on your next home A LOT more compelling!
It Might Be Best to Buy First If…
It's a Seller’s Market:
If homes are selling quickly and you’re worried you won’t find a suitable new place, buying first can ensure you don’t end up living in a van down by the river! Yes, this is a Chris Farley reference!
You Have Financial Flexibility:
If you can afford to carry two mortgages temporarily buying first is the best way to control where you’ll live throughout the entire process.
There are few new special financing programs that will allow you to buy your new home before selling your current home that won’t require you to make double mortgage payments. We can provide more information on these special programs.
You Have Very Specific Housing Needs That Are Hard to Find:
If you’re looking for a home that meets a very specific criteria, which is hard to find, buying first may be a better option.
You Can Rent Out Your Current Home:
If you can afford to hold onto your existing property, you could rent it out for a short period of time to help offset your expenses during your transition.
How to Decide:
Analyze The Current Real Estate:
The best way to decide is to start with a market analysis (buyer’s market vs. seller’s market) of our local real estate market.
And thankfully, we’ve done this for you with our April Home Price Report, which details stats on current listings, market times, and recently sold homes!
You can get access to this market study on our website here:
https://northeastohioliving.com/homepricereport
Updated list of Beautiful Homes For Sale with Main Floor Bedrooms!
You can find our updated weekly list of beautiful homes including both new construction and newly renovated homes featuring a main floor bedroom and laundry room here:
Have a great week!
-Rob & Kate Minton
eXp Realty
440-340-1445
P.S. Here are a few other ways we can help you:
1 - Grab a copy of our book, "Above List Price" detailing a 4-step system you can use to get multiple offers on your home.
2 - See a recent Case Study detailing how an Eastlake home owners set a record price with his recent home sale!
3 - Want to see what a buyer might pay for your home? Find out here.
4 - Are you having trouble finding a home that meets your wish list? Get Access to Homes Other Buyers Don’t Know About!