When is the right time to pay out of pocket to close a transaction?
Are you getting ready to close on your latest transaction? If so, congratulations! Closing a deal is no small feat in this market. Now may be the time for you to start thinking about opportunity cost, so let’s go over that concept today.
Let’s say the buyer has agreed to buy the home as is, and the seller isn’t making any repairs before close. All the inspections and appraisals have been completed, and the only thing left to do is move forward. Except, the buyer is suddenly stuck on some small thing like the outlets, and the seller isn’t willing to budge either. This is where opportunity cost comes into play.
“Sometimes, it’s good business sense to fix your clients’ disagreements with cash. ”
In our market, sellers have the power. They can talk to the buyer and say, “We have 10 other people lined up behind you to buy this house. Take it or leave it.” This can upset your buyer, and the deal could be in jeopardy. This is where you have to remember all the work you put into this transaction. More importantly, you have to remember that your efforts could have been spent doing other important things.
If your buyer and seller are stuck in a stalemate, it might be worth it for you to get directly involved to see things through. For example, if changing all the outlets will only cost $1,000 or so, you might want to offer to pay out of your own pocket to get it done. Consider it a cost of doing business. Sure, it might be frustrating to fix your clients’ disagreements with cash, but it’s good business sense.
I’ve seen this method used in the past to resolve client issues. In the early 2000s, I had a client who was stuck on the condensation building up between window panes. It was getting to the point where this issue had the potential to sink the entire deal, so the listing agent pulled out his checkbook and paid for the $750 fix himself. At the end of the day, **that money was worth less than the opportunity cost of starting all over again with another transaction. **
Don’t get me wrong; negotiation should always be your first option. However, in crazy seller’s markets like ours, fixing the issue yourself might be the best option for both you and your client. This method has the added benefit of leaving a great impression on your client. If you fix their issue for them, you’ll be more likely to have a repeat customer who sends you referrals.
Hopefully, this lesson helped you start thinking about opportunity cost. If you have any questions, please call or email me. I am always willing to help!
