Negotiations – The Monthly Cost of Waiting For A Better Offer

   A buyer has come to the table with an offer that is low. You’re anxious for the Seller to reach an agreement with the Buyer, but the Sellers have no interest in selling their home for anywhere near the offer price. Using the Seller Pro-Forma analysis presented in the Cup O’ Joe- 2012 Seller Considerations #2 – The Cost of Waiting To Sell, presented on 2/2/12, we can determine the monthly cost of waiting for another offer.

In the example below, a buyer is offering $450,000 for a home listed by your seller at $500,000. Your Seller has already reduced the price $75,000, and has told you they won’t go a penny less than the $500,000.  First, if you’re sure it won’t sell for $500,000, you must ignore their objection and present a logical reason why it makes sense to accept the offer, or at least prepare a reasonable counter offer.

Presentation of the following analysis could be just what is needed to get the sellers past their insistence on selling at a price that won’t be met.

1. Consider the monthly financial impact of the following

A. Monthly Carrying Costs-

Principal & Interest on a $200,000 mortgage balance   $1,300.00

Taxes                                                                                   $250.00

Insurance                                                                            $250.00

Utilities                                                                               $350.00

Maintenance                                                                      $150.00

Pool                                                                                     $120.00

HOA Dues/Club Membership                                         $100.00

Total Monthly Carrying Costs                                        $2,520.00

B. Opportunity Costs

$400k sale less $200k mortgage- $200k

$200k x 5% annual return = $10,000

$10,000 divided by 12 months

Monthly Loss of potential investment income             $833.00

C. Potential Depreciation

Case/Schiller projects a 6% drop in 2012

$400k offered price x 6% = $24,000

$24,000 divided by 12 months

Monthly potential Depreciation                 $2,000.00

Total Monthly Loss                                                         $5,353.00

     Ask you Sellers how long it could be before they get an offer for more money. Point out to your Sellers that for every month they don’t get an offer, they are losing another $5353.00. If it takes another 6 months to get an offer, they have lost $5,353.00 x 6 = $32,118! If it takes another 12 months, they lose $64,236.00.

    Deduct the 6 month or 12 month loss above from the offered price of $400,000 and point out that an offer for more money in the future may not be better because of the loss described above. All counters should factor in the net real effect of keeping the home for a longer period of time.