17d • General discussion
Lower rates are not your friend. They are the seller's friend.
Everyone is celebrating right now. Rates came down. Monthly payments look better. Deals that didn't work 18 months ago suddenly pencil out.
And that is exactly when buyers start making expensive mistakes.
Here is what is actually happening.
Sellers see the same headlines you do. They know more buyers are entering the market. They know financing is easier. So they are raising their asking prices and getting more aggressive at the negotiation table.
I watched a client last month walk into a deal on a service business doing $180K in SDE. The seller wanted 4.2x. Two years ago that business would have traded at 3x all day. The seller's broker told my client "the market has shifted."
The market did not shift. The seller's expectations shifted because he knows buyers have cheaper money right now.
My client almost paid it. The monthly payment "worked" on paper. That is the trap.
A deal that works on a spreadsheet is not the same as a deal that builds wealth. If you overpay by
$150K because your monthly note "fits," you just volunteered to work the first two years for free.
Here is the rule I give every client right now.
Run your numbers at today's rates. Then run them again at 2 points higher. If the deal still works at the higher rate, it is a real deal. If it only works because rates are low, you are buying a rate, not a business.
The best buyers in this market are not celebrating lower rates. They are using them as leverage to negotiate better terms while sellers think they have the upper hand.
Comment RATES below and I will send you the deal stress test template I use with every client before we submit an offer.
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Lower rates are not your friend. They are the seller's friend.
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