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Showing posts with label cost of losing a deal. Show all posts
Showing posts with label cost of losing a deal. Show all posts

Tuesday, October 13, 2015

Walking Money - The Cost of Walking Away from a Good Deal in Key West

Most of my customers are buyers. I identify with their wants, needs, frustrations, and frugality.  I know what it is like to dream, to plan, to save, and to eventually to buy the special place to call home. Some people have a lot of money and they sometimes treat price negotiation as a bit sport while others treat it as a genuine business matter that is to be dealt with. They leave the emotion out of the equation and usually get the deal done. They know what they want and they usually get it.

I think a lot of buyers who are pursuing the dream of buying a place in Key West are often vexed by the perceived high or inflated asking prices on houses here. They often get overwhelmed by the process and the seeming intransigence of sellers who won't budge off asking price - or at lease budge enough. Some buyers draw a line in the sand. They take their stand and avow the seller can take it or leave it.

Unlike those dazzling dandies on BRAVO TV's Million Dollar Listing LA, I don't play games when I negotiate.  How can they trust me when I tell them something if I play word games with them?  They can't and they won't.  So I don't. I am straight with my buyers. I expect the same from them. When a principal tells me something, I conversely believe what he or she tells me. I have an ethical duty to be honest when dealing with my principal. Why should I expect anything less from him or her.

The line in sand becomes problematic when either side uses it as negotiating tool and really doesn't mean it. And the words line in the sand don't even need to be said to have the same affect.  Words do matter. Failure to respond to an offer or to make a counter-offer creates a sense of unease or worse on the part of a buyer who fears the seller really does not want to sell to that buyer. Likewise, when a buyer says "X dollars is my final price, he or she seemingly cuts off the ability to find a compromise. I run into this very often when buyers reach a point beyond which they are unwilling to go.

Sometimes the breaking point is a matter of a few thousand dollars. This becomes the cost of walking away from a potential purchase. Now I know every dollar in a deal matters. But some dollars are more meaningful than others. I can tell you what that cost is. It is predictable. It is the exact dollar amount amortized over thirty years. Let's say the buyer and seller reach the breaking point at $10,000.  Buyer won't spend a nickle more. Seller won't accept a dime less. Agents won't split the cost to save the deal. The deal is lost. The deal is lost over $46.31 per month (calculated at 3.75% amortized over 30 years).  A $25,000 disparity would cost $115.78 using the same amortization.  The point is the fractional issue is often a matter or pride or ego rather a genuine breaking point.

I know the price of houses houses goes up across most parts of America, but I doubt that it goes up as much as it does in Key West. We live on a little island out in the middle of the ocean. The island can't get any bigger and we can't expand the number of houses (or condo) beyond the number the State of Florida allows each year. We can't build skyscrapers and thank God we can't. So we are forced to sell the same houses over and over again. The best houses in the best locations sell for more money than inferior locations or inferior properties. And the word inferior does not mean  there is something wrong. It means the location or house is not as good as rather than there is something wrong.

To the buyer who wants to walk away from buying your dream house over $46.31 I would suggest that is about the cost of a pair of LEVI 501 jeans. How appropriate. You can have your walking jeans but not the house of your jeans.


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