Carrying cost is an often overlooked element hen calculating the cost of selling your real estate. Most real estate brokers will provide a statement of estimated closing costs and a breakdown of their commissions. Few will add the month expense of holding or “carrying” a property. If the listing doesn’t sell right away, the cost to carry the property can be staggering.
My job as a real estate auctioneer and accelerated marketer is to control the time element of a real estate sale. From listing to closing, we use a static time line to map out the phases of our campaign to sell your property. There is a marketing phase, a sale day phase and a closing period phase. Each on is a finite number of days and is documented on a calendar.
Controlling Time Saves Money
If we set the sale day on “August 25th”, for example ,that will be the day that we know your property will sell. It will close on or before September 25th. All of those dates are planned in advance so you will know when your property will sell.
In the “traditional” real estate world there is no preset sale date when a property is listed. Sure, some properties sell pretty quick, especially in a “hot” market. Others languish and collect dust and eventually expire without selling. It is a little scary when you are looking at comparable properties on the Multiple Listing Service and the “cumulative days on market” number is high.
Each day that a listing doesn’t sell costs you, the seller money in carrying costs.
Imagine every day at midnight an imaginary cash register rings your costs for the day. It will ring again tomorrow and every day the property doesn’t sell.
Carrying Cost May Include:
Save Carrying Cost On Your Real Estate
We’ll just the example of a single family residential property in Florida but similar costs are accrued when carrying commercial, multifamily and other properties.
Let’s say your subject property is in Jacksonville, Florida. It is worth $300,000. You have a 30 year mortgage at 4%. We are also assuming that the utilities will be connected for showings, inspections, security alarm etc.
For repair costs we used an estimate from the department of Housing and Urban Development of 1-3% on the home’s value per year. For this example we used the median of 2%.
Also for this example we are assuming that the home is not homestead exempt and that a lawn maintenance company is keeping up the property for showings etc.
Of course this is a touch estimate using rounded figures but you can easily see how monthly carrying costs can add up. Imagine your property lingers on the market for 6 months without a sale…
You will end up paying $17,568 to carry the property.
Consider also the mental carrying expense of holding a property for 6 months. Every night you hear the imaginary cash register, CA CHING! You spent $97,60 for the privilege of not selling your property today.
I have included some of the reference links below. You can use those to calculate the carrying costs of carrying property in your particular area.
Our method of competitive bidding that ends on a predetermined calendar day takes all of the guess work our of calculating carrying costs. Having a finite amount of time before a definite sale allows you to minimize your costs.
We also sell property “as is” with NO contingencies to eliminate any major repair costs and some maintenance and closing costs as well.
If you would like to learn more, fill out the contact form on this page and I’ll be glad to discuss it with you using real numbers.