Everyone who’s a luxury seller or buyer knows that the more “Days on Market” (DOM) the house is, the more damage can be done. If a property lags on being sold, buyers won’t be keen to buy, and the delay will affect the net proceeds on a sale due to the carrying costs the Sellers incur. These costs include mortgage, taxes, and upkeep.
When a property is vacant, deterioration can occur faster than if it were occupied. Based on this principle, the value is directly correlated and results in a lower selling price and lower net proceeds at closing. Builders, developers, investors, and flippers’ net profits are impacted by every day the house sits on the market. Financing costs, taxes, and operational expenses pile up during the inactivity.
The real estate market tends to be affected by seasons and trends regarding weather and the economy, including events like stock market changes and world crises. For example, the pandemic affected the real estate market even though it was a prime selling season. This goes to show that it doesn’t truly matter what time of year you sell as long as you sell it soon after it hits the market.
In this article, we’ll explain how carrying costs for luxury homes can be steep, but there’s a way out. Read on to find out how.
The Days Are Numbered
Price has very little to do with individual demands and, more often, with what people are willing to pay. When multiple buyers come through to purchase a property, they arrive over time and not all at once. Price reductions undermine the property value and leave buyers skeptical. The research shows that property pricing is mostly determined by the number of days the property has been on the market. The longer it’s been on the market, the more the value goes down and the more the sales price goes down.
Days on the market will cost sellers more money than they expected. When the property has been sitting pretty on the market for a long period, the buyers’ perception is that it’s old news, it’s out of favor, and it’s not desirable. The cost associated with the waiting period on the market accumulates as time goes on. Each day the seller waits is a day that the mortgage, cost of upkeep, real estate taxes, and insurance need to be paid. Costs can add up to approximately 15% of the property’s value yearly. If no one is living on the property, this can drive the value down even more. Sellers need to consider how much time and money they’re willing to put into putting their property up for sale.
Carrying Costs
The longer it sits there waiting to be sold, the more the seller will have to cough up. Selling a property today is better than selling it in one year. The lost opportunity and depreciation are money and time a seller can’t get back.
Picture this: you listed your luxury property for sale. You got a purchase contract in the first 30 days of it being up for sale. The contract is then terminated weeks later because of an unforeseen event. You’ll need to start from the ground up. Carrying costs will be added to what you’re already paying for operational costs. And if that market that was once up goes cold? You’re stuck with a vacant property at a high price tag and no buyers. Your net proceeds, even when bought, will decrease.
How do you avoid this? A real estate auction. A real estate auction makes sure that you will sell your property at the highest bid.
No fuss, no extra costs.
Best Time to Auction
Mansion auctions and auctioning luxury homes are the best-kept way to maintain an advantage over the traditional sales method of real estate. Right when it’s hot on the market, auctions step in and sell them. Research proves that the largest amount of interest is in the first month of a property on the market–auctions know this and take advantage of the hype.
Sellers can rely on this 30-day initial momentum to sell rather than opt for the long-term dragging the house through the marathon traditional sales method. Auctions don’t cap or limit the sale price. Traditional sales do. The excitement around auctioning only helps drive steam on bidding. Prices can be driven up beyond the traditional sales asking prices. Auctioned properties sell as is and have zero contingencies. They close the deal within a month of the auction date. It’s much simpler and quicker. You could potentially sell your luxury property within two months of the listing date.
Investors Get Auctions
Investors, developers, and flippers can all agree that there is a fire underneath the need to sell an investment property. The best way to do this quickly and cleanly is through luxury auctions. An auction can sell the property within a month of being put on the market.
Because there are no contingencies and properties are sold as they are in their present condition, most buyers pay the taxes along with interest on the sale price from the auction date to the closing date–around 30 days later.
Each day that a property sits, is a day that the investor can earn money as opposed to losing money by just carrying the property. With utilities, operational costs, real estate taxes, and loan fees, the costs add up, and a profit could very quickly become a loss.
An auction empowers the seller to be an active participant in selling and witness the price increase from the asking price to beyond their wildest dreams. They could never achieve the same reach with the traditional sales method. An auction also allows the seller to control the sale date, sale price, and terms of selling. Time is on their side.
With a company like Platinum Luxury Auctions, we know luxury real estate auctions well. With decades of experience, we’ve seen investors come and go with ease as they find their way to selling luxury property smoothly and efficiently.
