GRANGER, THAGARD & ASSOCIATES
"The Last Bid"
Our Property is owned by Me
Have you ever noticed how certain events in life come in groups, rain will come in spurts, etc.?
This past month a number of my prospects and clients owned property with someone else either in the form of estate ownership, church (by vote of directors), or fraternal organizations.
Would it surprise you that each one of the groups had the same concerns? They all wanted the best price, ease of selling, and a sale sooner rather than later.
The added element of some of these situations, not normally found in individual ownerships, is that each committee had an "expert" on the committee that was holding the group hostage. It was clear to the others, as it was to me, that there was an "agenda" with these individuals no matter how hard that person was trying to camouflage their intentions.
A couple of groups had absolutely no individuals with an individual plan but the groups had become frozen in moving on with the sale because of internal politics.
Did our auction presentation answer their concerns? You bet.
First of all, anyone, including a committee/family member that has an opinion of value of the property can come to the auction and compete with other ready, willing and able buyers for the right of ownership. The terms of the sale are laid out in the promotion and therefore the playing field gets real level in a hurry.
Would it surprise you that the "agenda player" had a problem with this?
In the estate situations, we simply pointed out that each member of the estate already owned a certain percentage by the nature of the inheritance, and therefore if that heir wants to buy out the other heirs at the auction then the dollars spent by the purchasing heir are already "less expensive dollars" by their percentage of ownership.
In other words, everyone interested needs to "put their money where their mouth is".
However, outside of the estate situations, the fraternal and church groups had another obstacle to overcome.
The purchase funds for the new building/facility had to come from the sale of the former facility. One group could not see that the sale of one had nothing to do with the purchase of another.
Here's the rub...
The groups were too close to their forest to see their trees.
"One of a kind" facilities like a church or building need their market (buyers) brought to them and not continued to be taken to the market that does not exist. As you may have read in our letter "the anatomy of the transaction" on this website, some properties do not have a standing market that is ready, willing and able,… like for a house in good neighborhood. (Even if you owned a house in a good neighborhood that was up for sale, would you not seek/dream/wish for the competitive bidding that is brought out in a good auction)?
As these facilities (churches and commercial buildings) sit idly by waiting for a purchaser to magically appear, the areas around the facility may have a changing external factor that can have an impact on the value. Often, it is better to have this year's dollars from a sale rather than next year's dollars.
My congratulations go out to the real estate listing salespeople and their brokers that caught on to the above scenarios and brought us in to visit. About five minutes into our presentation each of the committees said, "this is the answer". It was.
Which now brings us to the "road map" part of this newsletter.
Do you start out on an important trip without directions to get there? Would it surprise you that many real estate sales attempts do just that?
Sellers sometimes have to learn the hard way over the time their property languishes on the market that they have not a way to take the property to a market and they lack a way for the market to get to them.
In other words, there is no "strategy road map" to or from the property for any ready, willing or able buyer or even the seller.
If the seller does not care about planning the date of the arrival (sale) or how they are really going to get to the end of the journey, then any old destination must be okay. Right?
The auction process solves many seller concerns.
Sometimes the auctioneer is in the corner of last resort because he must wait for the sellers to educate themselves, become wiser and then discover the benefits of a well-planned auction.
Personally, I like being a life preserver or the cavalry to the rescue, but the most fun we have with our clients is offering at auction a property that has not had an inhibiting ceiling of value, called a price, attached to the property.
Have you ever noticed who uses auctions first instead of last?
Sellers who have taken the time to learned how to use the only motivators of human nature, greed and fear, for their benefit.
If you agree that about 90% of all wealth is held by about 10% of the population, you may also agree that this group (the 10%) knows how to use different financial tools to create gains.
This group has learned through schooling, family secrets, or on the job experience that it is the market that determines price and not the seller. If the seller's opinion was the end-all, why do we need a buyer? Oh yeah, they bring the value,.. the money, ..the liquidity.
This same minority knows that the real economies of the world are not built around the laws of supply and demand but demand and supply. There is a tremendous difference in the two philosophies.
Have you ever noticed that the best art, antiques, stocks, and real estate are structured for a bidding war (auction)?
Have you ever noticed that most every body else just "slaps" a price (not the market's opinion) on their real estate and then usually rides the price down to the market's opinion. (And if a seller sells real fast at the "listed price" to a buyer then the seller guessed too low and again the market bought at their price).
Here's three adages:
Have you ever noticed there is not much sense of urgency to react to the seller's opinion, unless it was too low a guess? That's right, price tags are missed named, should be called "guess tags". Have you ever noticed that people, especially buyers, will want or desire what other people want/desire and will compete for that prize if it carries the market's confirmation "validation of opinion."
Have you ever noticed that lending professionals will quickly hire an experienced auction firm to sell collateral that may have come into their possession? Do you think these lenders like risk? No.
Do you think they like money? Yes. Do you think their profession has taught them different strategies? Yep.
There are parts of our society that know how to use different tools to accomplish missions and exposure to those tools has given them the power to employ "the tools of the market".
What are the tools of the market? Greed and fear.
Now go back and read the "Anatomy of the Transaction" at this website. The author, a retired banker, analyzed the components that create the "anatomy of the sale" and wrote an interesting document.