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  • Writer's pictureBridget Sullivan Mermel CFP(R) CPA

Smart House Selling: Expert Tips and Strategies from Financial Planning Pros

In this episode of FTFP, John and Bridget discuss the challenges of selling a house and offer their insights and advice. From pricing strategies to considering carrying costs, they delve into the emotional and financial aspects of selling a property. Join them as they explore the decision-making process and the importance of taking into account the value of time and effort. Don't miss out on their valuable tips!

Episode about Bridget selling her house:

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Bridget: Hey, John, how do you sell a house? I want to get your opinion. Hi. I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John Sherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. And before we start talking about how Bridget can sell her house, I want to remind all our viewers to hit that subscribe button. That helps other people find this information on YouTube. And so, click subscribe, and let's talk about house selling.

Bridget: Burt Whitehead said that houses are easy to buy and hard to sell. And he also said that you make money when you buy, not when you sell. Those sayings are always in my mind when I'm thinking about selling a house. As you know, my husband and I recently bought a house, and we were able to float two houses at once. And so, we recently just put our old house on the market, and we did that about two and a half weeks ago. Our real estate agent gave us comps for how to figure out what to price it at. And the months right before we put it on the market seemed like a hot market, and so we priced it I wouldn't say aggressively, but just not conservatively.

And so, then you kind of put it out there and wait and see what happens. It's been interesting. What's happened is that the market now seems like it's a more traditional late fall market, and so it's slow. We haven't gotten that many people looking at it, and there just aren't that many people looking in general from what I'm hearing from other sources. That's what our agent is telling us. So then it's almost hard to figure out. Should we lower the price? Because that seems like price is the biggest lever that you have, but once you pull that lever, then it's gone.

And I know from research that you have a relative bias in these situations. So I think, “Okay, lowering the price by 2% isn't going to be that big,” but actually, $10,000 is $10,000, whether you're buying a house or going on vacation. So if I think about how many vacations I could get out of this, or how many years’ worth of groceries I could buy with this price cut, then it kind of puts it in a different perspective. And the traditional real estate market is that it's slow in November, December, and it picks up January and then maybe even more in February. And so, once we head into January, February, it's not like we can then raise the price again. So we're trying to figure out what to do.

John: Thanks for sharing that, Bridget. When you first brought this topic, I thought, “Well, what do you mean? Selling a house is easy. There's all this demand. People are clamoring and throwing money on your doorstep.” That's the word on the street. And maybe for a while that was true, but maybe not so much now. And so, this is a really interesting topic. I'm glad you brought it up. And you're a financial planner. Well, just figure this out. Why can't you do this? And even though cognitively and maybe emotionally you can give advice to other people on certain things, it can be hard to do it yourself. And I've had the same experience in my personal financial life. How do you make these decisions because the emotions get in the way? It's different when it's professional versus personal, so it can be challenging.

Bridget: Yeah. Well, if I was advising a client, I would just tell them what I just said at the end, which is think about what that means. If you're going to lower it by $10,000 or whatever, think about what else you could do with that money. And don't just think, “Well, that's not that much in relation to the whole price.”

John: Yeah, I love that topic. We deal with this a lot. I know you do as well. When you're buying or selling it's easy to say, “It just a little bit more. It’s wrapped into the mortgage, and so it's a low monthly cost or it's only this much,” whether it's sales commissions, other expenses, different things. And then you go, “Wait a minute.” When it's $50 a month, okay, that's not a big deal, but when it's $10,000 that’s different. That’s literally vacation money. That's literally grocery money. And to be mindful of that stuff is important.

Bridget: Yeah. However, we do have the costs of carrying the old place. So that costs a certain amount every month. But it is lower than you would expect, which is why we can do this. And that's just because we were able to get our old mortgage down to a very low rate and we've had it for many years. So it's not like the carrying costs are huge, but they are a factor. But my fear is that if we lower the price, we still don't sell it, and then we've just paid all the carrying costs for those three months anyway.

John: Right. A couple of things that come to mind here that I just wanted to share. And I love that you quoted Bert Whitehead, the guy who started the Alliance of Comprehensive Planners. And I've had the personal experience saying, “You make money when you buy a property, not when you sell it.” And maybe that'll be an episode for the future on some of my rental real estate mishaps. And one of the things that I learned from Bert is that when you're in a position of trying to make a sale, for the first price drop, don't drop it by a couple thousand bucks, but get something where you're going to sell it, where it's going to get in a position to make a move.

Bridget: Okay.

John: And I think that makes sense. It's kind of like saying, “Listen, if we're going to take a haircut on this, then decide to do it.” And you brought up the holding cost, too, which is exactly the right thing. We've got this purchase price, like, what do we want to get out of this thing? but then it's not free to own. And from a financial standpoint, number one, you go, “Listen, what does it cost you to hold this for the next two or three or four or six months?” And if you do that and get your current price for it, well, you've already lost that money.

Jeez, can you take that amount and just subtract it from the purchase price today? Does that make it sell? You need to think about that metric. The other thing I wanted to bring up is that in addition to the financial cost, there's the time and effort, because you still got to think about it and take care of the property. Nobody's living there, if that's the case right now, and you've got the heat bill, and then what if things go wrong and you have to think about that.

So there's the financial aspect, but then there're also the time and effort and emotional aspects. So there could be value in saying, “You know what, I just want this thing to be gone.” Financially, it's not the best decision to make, but it might be the right decision to take a bigger price drop and go, “You know what? If it's sold by Thanksgiving, I'm really happy about this.” So there's that factor, too. That's hard to quantify, but still meaningful and important.

Bridget: Yeah. I really appreciate you bringing this up. So you're trying to talk me into a bigger price cut😊

John: At least think about it, right?

Bridget: That's interesting. Thank you. Okay, very good.

John: Sorry, just before we continue, I have one more thing that I thought was really interesting, and you're probably exactly right, but I question it. Let's say we cut the price now and it doesn't sell. I heard you say, “Well, we can't just raise the price anymore.” And my thought was, “Well, why not, right? Why can't you change that?” And that's the commonly accepted wisdom to say, “When this price goes down, you can't make it go back up.” And again, that's probably right, but I go, “Listen, if I'm looking to buy your house and it's the right fit and the right price, what difference does that make?” And again, it probably makes a big difference, but it seems to me like, well, maybe that's not quite as true as we think it is.

Bridget: That's very interesting. There is another thing at play in the current market, or at least there was just a few months ago, so I don't know if this is true for today because you can't take a few months ago and say that's exactly the same as it's going to be right now. The interesting thing about the real estate market, and it's the same for the stock market, is that a few months ago, if a buyer came in and they thought it was underpriced, they would offer more. And I haven't really seen that in my lifetime, that people would offer more than what the asking price is, but we could say that if we did lower the price more, we could hope that that's the case. That if somebody came in and looked at it, that they would offer more if it was underpriced.

John: Yeah. And I'll tell you, recently we sold my dad's house, and we had similar advice to what you just described. There was a range of prices, and my brother and I were looking at it and thinking, “Well, Jeez, let's push the top end.” The holding costs for that were very low. And we were thinking, “Why not?” And the opinion of the realtor was, “Hey, if you price it initially too high, you're not going to get enough people looking. If you price it on the lower end, you're going to get more people looking and actually get a higher than asking price offer,” which doesn't make cognitive sense to me, but from what I've seen in it, and what you're describing here, that has been the case anyway and is maybe something to consider.

Bridget: Awesome. So I think that's a great place to wrap it up. So I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. And I was just thinking that we might have to have people stay tuned in for the next episode where find out what actually happened with Bridget's house, so that could be their next episode. But in the meantime, hit the subscribe button so that you are notified when that next episode comes out on Bridget's house sale.

Bridget: And don't forget that we're both members of ACP, or the Alliance of Comprehensive Planners. And we were just talking about the founder of it, Bert Whitehead, but it's a group of financial planners that kind of all think alike. And if you like how we talk, we're both taking clients, but if you're looking for somebody who's local, you can check out

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.

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