We’re all aware of the fact that by waiting to sell, a homeowner can easily incur thousands of dollars in additional expenses from mortgage and other carrying costs. By pointing out the monthly loss to a seller, it can motivate them to avoid the additional monthly costs by accepting an offer that’s less than the asking price.
The same approach can be used with your buyers to encourage them to pay more than their original offer. Use the approach below as a way of justifying a higher price to your buyers.
Step 1. Identify the approximate value of the home today by researching what comparable properties have recently sold for.
Step 2. Research sales of comparable properties that sold 12 months ago.
Step 3. Determine the increase in value that has occurred over the past 12 months. For example, a property that sold 12 months ago for $600,000 that is now selling for $660,000, experienced 10% appreciation ($60,000 increase / $600,000 price last year).
Step 4. Determine what the value would be in another 12 months at the same appreciation rate as the past year. In our example above, $660,000 x 10% = $66,000.
Step 5. Calculate the average monthly appreciation by dividing the annual appreciation by 12 months. In our example above, $66,000 / 12 months = $5,500 per month.
Step 6. Show your buyer the cost of waiting to find another property by showing them how much they lose each month based on appreciation over the past year. In our example above, waiting would be the same as writing a check for $5,500 for each month they delay their purchase.
The cost of waiting as calculated in the above example can also justify a higher than appraised purchase price. If the buyer waits another 4 months to find a home, he would have given up $22,000. Why not just pay the extra $22,000 now while the selection is good? Remind your buyer that funds they’ve allocated for the purchase, are earning next to nothing right now in their bank account. By buying now, your buyer will avoid the risk of even higher appreciation as the real estate market continues to recover.