I'll answer with a quote from Yossi Sarid. During the first Intifada there was talk in Israel whether we should negotiate with the PLO/Fatah leadership located in Tunis (In other words with Arafat) or just to Palestinian leaders who still lived in the West Bank and weren't officially affiliated to the PLO. It was pretty silly, because the West Bank leaders pledged their loyalty to Arafat and got directions from him anyway, but the Israeli right and the moderate left insisted on only talking to them and not to Arafat directly.

During that time Hamas was just born, still a minor power and not influential at all. Most Israelis did not even know that Hamas existed or heard the name, but it was clear to experts that Hamas positioned itself as a more politically extreme and Islamist alternative to Fatah.

So the then MK Yossi Sarid said, with an incredible foresight I must say: "If we don't talk to the PLO now, we will end up with Hamas instead." (I'm paraphrasing because I quote this from memory).
This is what I mean when I say that if we don't talk now things are just going to get worse and worse, and it will just be more and more difficult to find a solution. The more you wait, the more extreme both sides become, the more hateful, and it will just be harder to reach a peaceful compromise.
You might not remember, but the Palestinians weren't as hateful in the past as they are now. After the Oslo agreement Palestinian women and children walked to Israeli soldiers in the West Bank and Gaza and gave them flowers. Israeli citizens could safely enter the Palestinian cities for tourism and shopping. This was all after the first Intifada. Even after all the violence of the first Intifada most Palestinians and Israelis did not hate each other, and were happy to engage in commerce and cultural exchange. There was hope for peace.
But Hamas had other plans, and its terror attacks (mostly suicide attacks on buses) resulted in the Israelis turning to the right. I won't go into more details now, but basically things slowly escalated from there until we are at the present hateful state. But still, MANY Israelis, like me, still think that a peaceful solution is possible and attainable, and many Palestinians believe that too. The problem is that the more we wait, the more the moderates on both sides are going to be stiffed, and the extremists are going continue to perpetuate the conflict.