I’m Not Giving It Away!

First Things First!

Happy Mother’s Day to all you Moms, Aunts, Caregivers, & Fur Baby Mamas from all of us at ECHO. And for all you guys – last minute warning to runout to Walmart and get those cards! That goes for me too.

Now, on to today’s JJ….

For all of you worried about tariffs, I say nonsense and hogwash! There are lots of free giveaways out there that will help with any inflation.

As you can see, my White Sox found a new way to give away a game this week.

Thank Goodness, the new Chicago Pope is a White Sox fan!!! We need all the blessings and prayers we can get.

Those naysayers about no free lunches have obviously not been to our subdivision’s Facebook community page. There are some 5-3 inch-3 ring binders (try saying that 3 times) that an owner left by the front door. Anyone can take ’em. Cardboard boxes are given away so long as you come and get them. A free happy birthday balloon sign although it must be used quickly before it deflates. For our dog, Chloe, there is 75% of a recently opened bag of dog food. And last but not least, an assortment of plastic hangers in a variety of styles and colorways in a designer bag.

Many of you, pessimistic types could be thinking, “Jeff, isn’t that garbage?” I would reply, “perhaps, but you don’t have to rummage and scour the entire blue garbage bins. Plus, if you did so, the neighbors would probably take a snapshot of you and post it on the community Facebook page which couldn’t be good for public relations. Furthermore, you’d have to take a shower after the delving expedition.”

Sellers of real estate would not last on our community Facebook page. As a matter of fact, every single one of them tells us this. “Now, Jeff – I’m not looking to give it away.” As sure as the sun rises and Chloe gives me those begging eyes for the dog food as the sun gets up, I know the seller will make a pronouncement, that they are not giving the homestead away.

We always reply with “No-no, No freebees here! We don’t want you to give it away and will fight for every bloody cent.”

But sometimes the seller needs to think about a tiny weeny part of giving it away. Before you sellers get all huffy, you must think about cost of carry and lost opportunity cost. Way back in the early days of the internet I actually did a vlog on it – You can see me as a strapping young lad on Jeff TV.

I’m going to use an example of a real home but not use the address. The owner said, “I own it outright and don’t need to give it away.” Here is the problem….

Asking price is 1.1million
Taxes are $12,500 a year
HOA is $550 a month ($6,600 a year)
Insurance is $9500
Landscaping is $250/month ($3,000 a year)
Let’s say electric is $100/month ($1200 a year)
Housekeeping is $250/month ($3,000 a year)
Pool maintenance is $100/month ($1200 a year)

So, one is looking at $12,500 + $6600 + $9500 + $3,000 + 1,200 + $3,000 = $37,000 a year or $3,083.33 a month

But there is unfortunately more. Fannie Mae/Freddie Mac estimates that 2% of the house value should be reserved for repairs. And another 2% for remodeling. We will leave out the remodeling but will add back in the 2% (say we’ll round to $20,000). Roof leaks, AC, water heaters, and stuff just breaks. One time I came home and found we had bats in the roof. Another time we had a leak from the upstairs bathroom. Yet again one set of French Doors was shattered in a million pieces. If you want the palmetto bugs to stay away, you need the bug man. The dryer lint guy who comes once a year. Within 3 weeks we once had our AC and water heater go capoey. Just yesterday the electrician came over to replace a smoke detector that was beeping from inside the ceiling. Let’s say we get lucky and the add-ons are just 1% and we’ll round a bit lower to $10,000 a year for our example.

So, now we are at $47,000. But then there is the usage of money. Let’s say our seller gets 4.5% in a money market on a $1,000,000 net sale. That’s $45,000 on lost opportunity. The total now is $92,000. Sellers have to do mental gymnastics to come to grips with this concept. Two separate ways to think about it are….

1. A home can be looked upon as a mattress. That $45,000 loss of opportunity cost is literally typing up $45,000 under the mattress.

2. If you were receiving a check for the $7,666.67 every month ($92,000 /12) would you call and tell them to stop payment. Or if you had to write out a check for $7,666.67 a month and send it out, how would that feel?

Because all of it is conceptional and one doesn’t have to write out a check each month or even a $254.06 check each day, it’s hard to visualize. If a check comes in the mail and you don’t see it, does it exist?

We even have a Cost To Carry Worksheet although you’ll have to add in incidental costs and lost opportunity costs if you are not using it.

Our job with Sellers is to make them aware of reality and help them through these concepts. There are pluses to holding onto a home through season if the market has low inventory and appreciation is coming. Zillow recently predicted a stagnant marketplace. Most forecasts I’ve read do not see an increase in home prices throughout the rest of the year. Things won’t get bad because homeowners are great on paper and there aren’t fraudulent loans. That should keep prices at the same level although the real value could dip a bit with real inflation.

For Buyers, the summer is the best time to purchase as there are more choices, less competition, and real estate is the safest place to park one’s money. A lot will depend on the tariff and mortgage rate situation. If one is in a need to sell situation, it’s critical to open one’s eyes. Price within the price parameters and sell it for a bit less. Nine months of carrying and lost opportunity cost at the same selling price as of today and our $92,000 example is -$69,000.03. Now, that’s a lot of money to give away.