Make More Money By Owner Financing - By: Kalinda Rose Stevenson, PhD, Posted on: 2007-08-24

One of the hardest concepts to grasp is why you can make more money by selling at a discount now rather than waiting to get a better price. The reason concerns the time value of money.

This is an example of the time value of money at work. Last year, a real estate agent listed a house in my neighborhood for $950,000. Even at the time, that seemed like much too high a price for the immediate area. For more than a year, the house stayed on the market.

PRICE REDUCED was added to the sign in front of the house. Then the prices started to go down, slowly and steadily as the house didn't sell.

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

Early in the decline, my husband wrote a letter to the seller asking if the seller would sell the property by carrying a note. In other words, he asked if the seller would owner-finance.

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 strategy the real estate agent advised is the typical solution for tough times. Keep lowering your price, until someone will 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.

Article Source: http://www.southerncaliforniarealestateagent.com/submit-real-estate-articles

Why owner financing is the most reliable way to increase profit, sell quickly, and increase cash flow. Think differently about money with No Money Limits.

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