August 31, 2023
Here’s how greed gets in the way of good deals.
I will show you how a two million dollar gap became a five million dollar lesson.
The Initial Negotiation
We had a buyer that was willing to pay $16 million for a property in downtown Austin that was listed for $18 million.
It was a really fair price, and one of the issues with properties like this is they’re truly unique properties, so there are very few comparable assets to reference for accurate valuation.
You can’t actually say what it’s worth, so it’s a little bit subjective.
We felt like our buyer was totally in line, but the seller, who was a multi-millionaire, was getting a bit greedy and was not going to come down from his $18 million price, which is a little bit arbitrary.
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The Consequences of Inflexibility
What happened over the next couple of months is that the residential real estate market deteriorated, and that seller came back to us and said, “Hey, we’d like to accept your previous $16 million offer.”
I strongly advised my clients based on market analysis that they no longer needed to pay $16M. My client agreed so we responded, “If you didn’t notice the market changed. We’d be happy to move forward but our offer is now $13 million.”
He firmly rejected any further price reduction from $16 million, effectively ending negotiations.
Why Timing Trumps Pride in Real Estate
That property still hasn’t sold over two years later, and I don’t know what a couple million dollars really means to that guy because he’s worth hundreds of millions.
The decision appeared driven by greed and emotion rather than business acumen.
Instead of moving forward stress-free with a completed transaction, he remains burdened with an unsold property.
Conclusion
Sometimes the biggest obstacle to closing a deal is ourselves.
This seller’s story shows how inflexibility can turn a solid offer into a missed opportunity.
Here are the key lessons:
- Even experienced investors can let emotions override sound business decisions
- Markets can shift faster than seller expectations
- Multi-million dollar properties require additional expertise and flexibility due to their limited buyer pool
- The opportunity cost of holding out often exceeds the perceived “loss” of accepting a fair offer
Remember: in real estate, the first offer is often the best offer.
This article is based on a story that I told on my YouTube channel here.