Just because a person has a good result, does not mean that they made a smart decision.
Last week I did something that had never done in my previous business career. I walked out of a client meeting because the pain of folly was too severe.
Our team worked hard and smart for a year to bring the owner a highly desirable, but improbable result. We had interacted with three times as many buyers and brokers as a typical successful transaction. As a matter of perspective, our team has a success rate, a batting average, a closing rate, that is about twice the industry average. We got whisper close, less than half a percent apart. The owner wanted a bit more than the market would pay.
After four months and talking with many other brokers, the owner called me back. He said he was to sell now. During the year of COVID it got harder to finance his building. The few sales which appraisers would consider comparable pointed to a lower value. Our team understood that the owner was not likely to receive as much now as he walked away from a year before. Our voicemails had conveyed those headlines before the meeting. With these undeniable facts and confidence my silver throated persuasive abilities, I went for the coffee meeting.
Some of my teammates believed it was a waste of his time and mine to meet with him again. One sage teammate warned that this investor didn’t care what the rest of the world thought, he was only focused on the quite favorable but extremely long shot he desperately wanted.
Our meeting began with good words, and mutually expressed hope. But evidently, the owner either hadn’t listened to our messages or ignored them. His fantasy was more important to him than independent expert opinion or the improbability of finding a rich fool who would overpay.
His property had no special distinguishing features. Even so, he could imagine an all-cash buyer falling in love with his property. That was his “reality.”.
He explained for the third time that he just needed a little bit more. He told me I was good enough to get that bonus value, thus I should get it for him. Market price was below his dignity; appraised value was immaterial. He expected our team to gamble another year and another $4000 of our funds to fulfill his fantasy.
He seemed genuinely shocked when I stood up, thanked him for the coffee and wished him well. He may have really believed that if he were persistent enough that he could change my thinking and that I in turn could bend the facts or hypnotize the market. Even though I’m a broker and an only child, I lack those delusions.
In effect, that owner wanted to win the lottery. After all, “someone has to win” and “you can’t win if you don’t play.” That sounds wonderful until you realize that the odds of winning a Powerball jackpot are 1 in 292,201,338.
I wish I remembered the idea of the lottery ticket, and how fluke situations occasionally produce wonderful results for a tiny minority. He confused the rare fluke with sensible probability. He will find a broker who will list his highly desirable property for his fantasy price. Perhaps a rich fool will pay a premium over other buildings of about the same vintage and about the same income in the same census tract.
I doubt it.
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We have all taken risks that we knew were against the odds. Now that you’re older and wiser, how do you deal with decisions involving quite favorable but extremely unlikely outcomes?
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Terry Moore, CCIM, is the author of Building Legacy Wealth: How to Build Wealth and Live a Life Worth Imitating. Read his “Welcome to My Blog.”