Golf’s Lessons
A young man with a few hours to spare one afternoon figures that if he hurries and plays very fast, he can get in nine holes before he has to head home. As he is about to tee off, an old gentleman shuffles onto the tee and asks if he can join him. Although worried this will slow him up, the younger man says, “Of course.”
To his surprise, the old man plays quickly. He doesn’t hit the ball very far, but it goes straight. Furthermore, the old man moves along without wasting any time.
When they reach the ninth fairway, the young man is facing a tough shot. A large pine tree sits in front of his ball, directly between it and the green.
After several minutes pondering how to hit the shot, the old man says, “You know, when I was your age, I’d hit the ball right over that tree.”
With the challenge before him, the young man swings hard, hits the ball, watches it fly into the branches, rattle around, and land with a thud a foot from where it had started.
“Of course,” says the old man, “when I was your age, that tree was only eight feet tall.”
Ten years ago, I could hit a seven-iron 175 yards. Today, when sizing up a shot, sometimes I will forget that I am no longer the long-hitter I used to be. I have found that my score improves if I pick the right club.
Applied to Real Estate
More often than not, when a property owner is looking to sell a property, they have a value in their head that is based on the past, say, when interest rates were 3.5% or when their office building was 100% leased. When asked what I think a building is worth, I base my valuation on current market conditions and the property’s status. Unfortunately, I will lose the beauty contest to agents who tell the Seller what they want to hear. It is okay to price a property hoping that a Unicorn shows up with a bag full of cash, but if the “Price is not right,” The Seller should be prepared to reduce the price, particularly if they want to sell the building in their lifetime.
I took a listing a couple of years ago, and I cautioned the owner that i felt the property was overpriced. We went into the marketing with the understanding, so I thought, that if, after a couple of months, the activity was low, we would reduce the price. Well, the owner never authorized a price reduction. Unfortunately for me, the listing expired and a month later the property got re-listed at the same price. Six months later, the property was still on the market.
I have a listing for a great property in Midtown. The initial price was $1.7MM because we needed to confirm the size of the property. As it turns out, the building is smaller than what we thought. So, we reduced the price to $1.5MM. We probably could have kept the building priced higher in hopes that the Unicorn would fly down from his pick cloud; Even at $1,700,000 the price is not offensive, but at the end of the day, even if we got in contract at $1,700,000, the buyer would likely end up asking for a price reduction during escrow. In CRE land, this is know as a “Retrade.”
The property at 1418 20th Street is a block south of Waterboy. If you want to learn more about it, please contact me at (916)761-1202 or [email protected].