The difference between $1000 and $7.29
Posted by Joshua Keen on Saturday, June 7th, 2008 at 9:40pm.Most buyers think by saving $1,000 off the asking price, they're actually saving $1,000.
This isn't entirely true.
As a buyer you're most likely financing between 70% and 80% of the purchase price. At an 8% interest rate you only take $7.29 out of your pocket per month for every $1000 you add to your mortgage. That means it would take 137 months or 11.43 years for you to take $1,000 out of your pocket. Most people don't own their homes for 11.43 years.
Now, as a Seller, for every $1,000 you come down in price it's exactly $1,000 out of your pocket.
The difference between $1000 and $7.29 is the single most misunderstood concept of real estate negotiations.
This isn't entirely true.
As a buyer you're most likely financing between 70% and 80% of the purchase price. At an 8% interest rate you only take $7.29 out of your pocket per month for every $1000 you add to your mortgage. That means it would take 137 months or 11.43 years for you to take $1,000 out of your pocket. Most people don't own their homes for 11.43 years.
Now, as a Seller, for every $1,000 you come down in price it's exactly $1,000 out of your pocket.
The difference between $1000 and $7.29 is the single most misunderstood concept of real estate negotiations.
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