Thursday, September 10, 2009

Don't Be Greedy

Last year, when I was looking for an office building to purchase, I had a verbal agreement with the owners of a building here in Smithtown to purchase their building for $950,000. The best part of the deal for them was that I had found them before they had hired a realtor, which meant that they were going to save approx $45,000 in broker fees.

They were selling the building because they had gone out of business...tying up some loose ends due to their business closing lead to a two week delay from the time we reached a verbal agreement to the time we were putting everything in writing.

Using the strong-arm tactic of "we have someone else bidding higher, if you still want the building, you're going to have to pay more," they now told me that the purchase price was $1,050,000 ($100,000 higher than we agreed upon), plus they were now throwing in several other clauses/stipulations that were never discussed prior and were all obviously detrimental to me.

Frustrated with their desperate attempt at negotiating, I decided to take the weekend to look at some other buildings. Luckily I did and I found a building just a few blocks away that was a much better fit for my offices (more office space, better parking, great location, etc.) for a lower purchase price.

When I informed the owners that I would be walking away from their deal, they started to bring their purchase price back down to the $950,000, but it was too late.

It is now 17 months later and I drive past their building at least twice a day (on the way to my office and on the way home from my office)...the "For Sale" signs have been up ever since...they are now on their second realtor and there are "Price Reduced" signs now up on the lawn as well. As of today, the asking price is $925,000.

So, to take a step back and analyze this scenario, by being greedy, these owners have so far lost $142,000 between 17 months worth of mortgage interest, real estate taxes, maintenance, utilities, and the fact that they will now have to pay a broker fee if & when they do sell their building. This $142,000 loss assumes that they sell their building tomorrow for full asking price, which in this economy, I don't think will happen. I forsee this building selling for somewhere in the low to mid $800,000s sometime at the beginning of 2010.

Moral of the story: Don't be greedy, especially in an economy like this. Know when a good deal is staring you in the face and make it easy for your customer/client/buyer to do business with you.


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