We hear it all the time. When will my house sell? What are you doing to move my property? Why is my house not selling? The typical response – “the market is slow; you need to lower your price.” And the seller responds “I cannot afford to go any lower.” Round and round we go in this battle as frustration sets in on both sides and as a result the house sits, sits and sits. 

So, what do we do? Sitting at a NINJA Conference in Fayetteville, North Carolina I listened as a very smart gentleman showed me how to see an old concept in a new light. That man was Larry Kendall, the founder of the Group, Inc. out of Fort Collins, Colorado. The idea addressed the obstacles in today’s market and especially this problem. 

Carrying Cost…We all hear it but fail to act on this simple concept. In its simplest form, ‘carrying cost’ is how much you will spend until a transaction takes place.

Example: If your payments are $3,000 a month whether you’re the bank or the individual you have carrying cost. Add utilities, maintenance, marketing and commissions to this equation and your cost per month can go up to $3,500. 

Let’s consider this scenario. Your seller has just found a job in Kansas City and they need to move now. They will earn more money there and housing is cheaper in the area than where they are moving from. For their home’s price range there is a chance, because of the inventory currently on the market, their house will not sell at their price of $500,000 for 24 months. Your seller owes $475,000 on the home that they purchased for $485,000. 

Sound familiar? You know if they lower their price to $450,000 they will sell their home in a month. However, the home owner in their mind cannot come to the table with the $35,000 plus the 6% commission of $27,000 for a total of $62,000. Seems impossible right? Well, let’s look at the alternative. At a selling price of $495,000 many assume that they just made $10,000. Not so fast. They paid a commission of 6% which totals $29,700 and they waited 24 months to sell their home which cost them $3,500 x 24 month. That equals $84,000 to carry the home. Add those two things together and the cost to carry the home is $84,000 + $29,700 = $113,700 – $10,000 profit for a total of $103,700. 

So the client has two choices. By lowering the price of the home the seller’s difference with carrying cost is $103,700 (waiting 24 months) or $62,000 by lowering the price. If you present this scenario to your client you just saved them $41,700. You can also present this to the bank that is carrying the loan. 

While it may seem like simple math, sellers are often so focused on the actual listing price that they fail to consider the costs that they may carry in order to obtain their perfect selling price. This is a great example of how getting back to basics is sometimes the best solution to a troublesome decision.