There is a cost to waiting. 

Today, I’m breaking down how to effectively use cash flow and numbers to help buyers and sellers understand that cost during the listing and buying process. 

Let’s start with sellers. 

The cost of waiting on the seller’s side

Say a home’s not selling. We know there are three reasons why that happens. 

  1. It doesn’t show well; buyers don’t get the right emotional reaction when they walk through the door. 
  2. You don’t have the right exposure online and offline. 
  3. It’s not positioned properly to sell. 

I’m going to assume that because you’re reading this and paying attention to your business, one and two are in order, and the home is simply not priced properly. 

You may hear this objection: “Hey, we’re going to wait for our price.” 

If that seller has already moved out of the home, then every month they carry that property, it costs them money—in a number of ways. 

The first one is obvious, but it pays to know the numbers. Find out what their mortgage payment is and make sure it includes taxes and insurance. Every month that goes by, it’s costing them money. 

Now, some people are going to say, “Oh, well, I’ll get it back when I sell because I’m building equity.” 

But we know that the majority of mortgage payments consist of interest. 

Plus, if the home is vacant, the insurance rates might go up. 

Then if, let’s say, you’re in the wintertime and you’re in heating season, there’s a utility cost there. 

In addition, there’s someone keeping an eye on the property, making sure nothing goes wrong. So, your time factors into it. 

Lastly, what can happen here is the fact that they can get maybe 3%, 4%, or even 5% interest on their equity. Let’s say they have a couple hundred thousand dollars worth of equity in the property—we’ll use the number $300,000. Well, you can get another $15,000 in interest over an annual period of 5%, which is going to cost another $1,000/$1,250/$1,300 a month. 

So, every month someone doesn’t sell the home, assuming they’re going to take the same offer, it’s costing them all the money we just broke down. 

That’s how you need to explain this to folks because most people don’t understand cash flow. 

The cost of waiting on the buyer’s side

On the buyer’s side, there is also a cost to waiting. 

Let’s say you have a buyer and their budget is $425,000. We know prices are predicted to go up roughly 4% this year. They’re putting 10% down, and rates, let’s call them 7%. 

You may hear the following objection: “Well, I’m going to wait for rates to come back down to 6.5%” 

That’s going to cost them, and it’s going to take six months if it happens. So we’re looking towards the end of the year in the third or fourth quarter. 

What you want to do, then, is break down what their payment is at the current rate and what their payment is at a lower rate. 

Make sure that you are being realistic. I don’t know that 5% is realistic for the end of the year. So let’s call it 6.5%. Again, make sure you factor in that appreciation of 2% over a six-month period. So it’s actually going to save roughly—if you look at going from 7% to 6.5%—$78 a month. 

However, at that point, they’d be losing out on the equity they would have built because you can’t go back and get the price from six months ago. 

Next, let’s say somebody is paying rent. Here, you want to get clear on the numbers, just as you would with sellers who have already moved and are holding onto a vacant property. 

Look at the whole reality of the situation and confront the brutal fact. 

Let’s say they’re paying $2,000 a month in rent. When you break down these numbers, sure they might save $78 on principal and interest, but they have the lost equity (let’s call it $1,400 a month). So, with the rent they’re paying—because they’re paying somebody else’s mortgage, somebody else’s taxes, somebody else’s insurance—it’s actually costing that buyer $3,337 a month by waiting. 

Why go through this exercise? Cash flow and finances are real. If you cannot explain the finances in a way that people can understand, your presentation will not be compelling. 

And in the current climate, these are all things that factor into these decisions. The agents that are going to win, especially in a changing market, understand the finances.