My Unpublished Articles
Real Estate Revolves Around Time and Money
August 18, 2008
Time is money. Money can buy time. In virtually every activity of our day, the choices we make involve a consideration of the cost in time and the cost in money.
The real estate market is founded on these two assets. In fact, all statistics to measure the marketplace involve those principles. During 2007, over the course of 12 months, for example, the median price of a home sale in Malibu was about $3 million. A measure of money over time.
Every individual makes decisions regarding real estate that involve the weight of time and money. That includes many who do not invest or ever buy a home. They are making a decision that the money they have, at least at that time, is not enough to purchase the asset they wish. Instead, they rent, and pay money to a landlord over time.
In negotiations, the weight of time and money is everything. The result of a negotiation, including one that ends with no deal, is the result of the two parties, separately and privately, measuring their time and money threshold and positioning themselves accordingly. A buyer can take their time to decide when to spend the money they have available, which is always in a state of flux, as long as, over time, the values are not moving away from their capability. If a buyer suddenly has extra funds, that may accelerate the moment of decision to pounce on the house or condo they desire.
Most interesting is the behavior of sellers in the real estate market, something I have been studying for my 21 years in the business. My final conclusion is that half the time sellers behave in a smart way. Half the time they are just plain stupid.
Of course, sellers do not know what is going to happen in the future. Nevertheless, the one universal truth of a person or party selling a home is they believe that time will probably work in their favor to bring the most money they can receive. Everyone believes that at first. But it is not always true. In good markets, it makes sense. When the prevailing trend is that the value of property is increasing, a person selling is confident that over more time, more money can be gained. More time equals more money.
When, then, does that person ever sell at all? The obvious reason, that they determine separately and privately, is that they do not have the luxury of time to wait. They need or want to sell soon for whatever private reason they may have – a job change, wanting to scale down, anxious to move to a different lifestyle. In the end, time is such a valuable asset; it trumps the potential of waiting for more money. It is an underrated and undervalued aspect of negotiation. Often, time is more valuable than money.
Hundreds of times, I have seen sellers sell a home for much less money than they should’ve. Or less than they COULD HAVE! How does that happen? It is because for much of the time, money is more important to them. Then, they change their value choice to a preference of time. This is the frequent behavior of a person who puts their house on the market at a ridiculous price, whether by ego, or stupidity or just mere wishing, and when it does not sell over a long time, suddenly they need or want to sell more badly.
The best deals a buyer can make are often from a seller that started too high in price and has lasted on the market a long time. To make up for lost time, that seller may give up the most money in the end. It is a quirky but inevitable fate. The cost of asking too much, unbeknownst to many sellers, is that they grow exhausted over time and their passion for money disappears in the end.
Sellers, before hitting the market, should make a decision of what is important to them, time or money. In the current market, which is clearly demonstrating lowering prices, many sellers HAVE TIME and do not need or particularly want to sell. They won’t, most assuredly. The money is more important and since they will not get the money they desire, they will make use of the time. Other sellers are in the opposite situation. They do not have time. And the longer they take, the less money they will get anyway. In a market like this, as I have advised my clients, the money you get NOW, no matter how disappointing it is, is still better than taking any more TIME, particularly if time is not a luxury. The money later will only be less and time will be lost.
