Why Now Is The Best Time To Sell With Owner Financing

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by Kalinda Rose Stevenson, PhD

The time value of money demonstrates why you can make more money by selling sooner at a discount than waiting to sell at a higher price. At first, this concept might be difficult to understand.

A prime example is a property just down the street from where I live. The house was on the market for more than a year. The real estate agent first listed the price for a whopping $950,000. It was clearly overpriced.

After a while, the first PRICE REDUCED signed appeared in front of the house. This was the beginning of a long and steady decline.

$950,000, $929,000, $899,000, $869,000, $849,000, $799,000, $780,000, $760,000, $739,000, $725,000

As soon as the price started to go down, my husband wrote a letter to the seller asking if the seller would owner-finance. In other words, he asked if the seller would consider selling the property and carrying a note.

The real estate agent intervened to convince the owner that owner financing would require the owner to discount the property. On the agent’s recommendation, the owner was unwilling to consider owner financing.

After more than a year on the market, a SOLD sign finally appeared in front of the house. At this point, the seller’s asking price has gone down from the original $950,000 to $725,000. Even if the buyer agreed to pay $725,000, the difference between the original listing price and the final listing price was a quarter of a million dollars, $225,000 to be exact.

This leads us to a question: How much money did the seller lose by being unwilling to discount a note? In addition to the reduced sales price, consider that the seller had to pay mortgage, taxes, insurance, and maintenance expenses for more than a year on a vacant house.

The real estate agent was simply following the most typical advice for sellers in difficult markets. Keep reducing your price, so that someone will eventually buy.

There is a much better solution. If the owner had agreed to owner finance, by carrying a note, the seller could have sold the house at least a year earlier, for a much higher price. And the real estate agent would also have earned a higher commission. Before you agree to lower your asking price again and again, find out why you’ll come out ahead by owner financing.

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Why owner financing is the most reliable way to increase profit, sell fast, and increase cash flow. Discover how to expand your understanding of money with No Money Limits.