The Short Answer: It Depends On Your Situation
The old saying “time is money” is quite true. The more time it takes to do something, the more the total cost is, even if you have some profit. The question becomes: what is your time worth? Well, when you’re selling a home, that’s an all-important question. Waiting a month or two for property to move could cost $100k in the long run, if the new house you like is sold before you can buy it.
You’ve got moving to contend with, you’ve got repairs to contend with, property taxes, realtor commissions, closing costs, and more. Now, with a 1031 Exchange you can transfer your revenue from the old property into the new property, and sidestep much of the taxation involved. Even so, your closing costs won’t just disappear.
What you’ve got to do is weigh the pros and the cons. If you sell your own house yourself through posting a “for sale by owner” sign, simultaneously listing it across free internet sites, you may move the property—but it’s probably going to take longer than the average ninety day period which accompanies a realtor’s efforts.
Looking At Realtor Issues
So the realtor is going to charge you about 6% of the property’s value, and you’re going to have closing costs. Expect $100k in property value to put $90k in equity into your pocket or bank, excluding taxes. So on the one hand, you’ve got a $10k cost for three months, which puts your time value at $3,333.33 a month—on a $100k property.
If you’ve got a bigger property, then the value of your time is higher. For a $1,000,000 property, you can expect the realtor fee to be lower, as they understand pushing too hard will lose them more money. So likely, this won’t go up to $100k in total closing costs. However, you can expect closing costs to be somewhere around $40k for such a property; that’s $13,333.33 per month.
So if you’re selling your property yourself, and it took you four months to move, then in this scenario you’re looking at a minimum loss of $13,333.33 in time alone which. This is where online selling options through house-buying agencies come in. Just look at these Florida options for selling a house online posted to an ISoldMyHouse.com blog.
Essentially, an appraiser looks at your property, and quotes you an offer. If you like it, then you get that money, they get the property, and everybody wins. Yes, what you’re quoted will be slightly under what the market will bear for your home. This is so the home buying group can make a profit.
A Good Metaphor To Describe The Situation
Think of it like a seller of pre-owned vehicles. Somebody with a used car at a Kelley Blue Book value of $10k might have a dealer purchase that vehicle for $8k or $9k. The thing is, they can just drive up the car and walk off with cash in their hand. The dealer then repairs the car for about $1k in parts and labor, turns around and sells it for $13k, allowing himself to potentially be haggled down to $12k.
He makes a minimum of $2k per vehicle that way, and might even pull more. Well, it’s just the same with a home buyer. They’ll re-invest slightly in your property then list it at a higher price than you would have been able to.
They can sit on that house for a year, while you can’t—not at $3k to $13k a month in ultimate time losses. They’ll have a hundred properties on the books, and move an average of X amount per month, allowing them to keep operating. Individual sellers can’t do that.
Potentially, You Could Save Thousands
So how much can you save by selling your house for cash? Well, just look at the time. At minimum, you can chop months off the selling time.
Even going with a realtor, that can be hard to do. When you save time, you can move, you can re-invest, you can get on with your life. Collaterally, the savings may be too high to enumerate. Call it a minimum of $3k per month as a catch-all average on a property around $100k in value, and you’ll be about where most folks are in this situation.