How Do You Find The Peak Value?

[Ankesh]

This may be one of the questions that has no definite answer. So I'll pose it as a poll.

If you own a real estate property and are willing to sell it for $125,000 one year back.

But you can't sell that property for over a year. But then, within a week, you get 2 offers.

First offer is for $65,000.

Second offer is a cool $243,000.

Obviously, you reject the first offer. But do you take the second offer? Or do you wait - expecting the market to become even hotter - with the recent activity?

(Assume that yours is a one of a kind property and there is no market comparison. Also assume that the recent activity is not a coincidence. The property has made news.)

How do I find out if the prices will increase or if this is the best offer I can get?

What would you do? Sell or wait?

(This is not a theoretical question. I actually face this problem right now - but its not for real estate. Your opinion would help a lot.)

Ankesh,

Thanks for asking.

Always do what's in Your Best Interest. And, base that on Current Information.

Your best interest is to sell for the highest offer. And that's an offer you Currently have. An offer you haven't received isn't an offer, it's Fantasy Thinking.

But what if someone offers me sixty hundred million dollars? Might happen. Yep, and pigs Might fly too.

Seems like you're starting to suffer from Deal or No Deal greed - open just one more box cause it Might mean something better.

Can only make Informed Decisions on Information At Hand. And that is, two offers. Take the best if it's in your best interest, close the deal and move on and be done with it. If there's a bit left on the table, good. Makes the other guy feel good too.

Michael Ross

Hi, Ankesh,

Most people in this situation have a lop-sided view of things. They see only the potential gain, and not the potential loss, in waiting.

The correct way to make the decision is to analyze, with the best data available, what made the sudden increased offer happen? In the real estate example, is there a new shopping mall or city center planned right next door to your property? If there is, study the feasibility and the sources of info that lead to their decision, then make yours based on the expansion/value probability. If, however, it's an oil well....well...hold on tight.

If, however, it's someone who wants to just buy up certain property to hold on to it (some folks do that if it's in the way of potential growth. They'll buy huge city blocks of property, often paying more than current value just to make sure there are no hold-outs), grab the deal and be grateful.

Good luck in your decision-making.

Sandi Bowman

Ankesh,

If it has similarities to Real Estate and you can Do something with it short term to keep the Revenue going... Get someone to keep the payments Flowing for the Long Term gain...

If it has the Right Economics attached... And you Got/Get in at the right prices... It's hard to Lose...

But Investing means different Things to different people in different places...

It takes some Life Experience to Go back and Could've, would've, should've...

Tough decisions for Young people Today... Everything requires So... Much Money!

Having less Greed and realizing that you Don't need that Much as most Think is the Key...
http://www.amazon.com/Millionaire-Ne.../dp/0671015206

My Usual silly thoughts...

Phil

[Dien Rice]

Originally Posted by Ankesh

This may be one of the questions that has no definite answer. So I'll pose it as a poll.

If you own a real estate property and are willing to sell it for $125,000 one year back.

But you can't sell that property for over a year. But then, within a week, you get 2 offers.

First offer is for $65,000.

Second offer is a cool $243,000.

Obviously, you reject the first offer. But do you take the second offer? Or do you wait - expecting the market to become even hotter - with the recent activity?

(Assume that yours is a one of a kind property and there is no market comparison. Also assume that the recent activity is not a coincidence. The property has made news.)

How do I find out if the prices will increase or if this is the best offer I can get?

What would you do? Sell or wait?

(This is not a theoretical question. I actually face this problem right now - but its not for real estate. Your opinion would help a lot.)

Hi Ankesh,

I think it also depends on the rest of your situation too... For example, would it be helpful to have the money now rather than later? Having the money now could open new opportunities which are currently closed... So in that case, there might be a hidden "cost" ("opportunity cost") in not selling now...

Remember, you could always take that money and invest it in something else - perhaps something with a more certain future return.

So, one exercise to do is to estimate how high the price can go in the future, and what you estimate the probability of that happening is. Then, think of all the other investment opportunities you would have with that money - from putting it in a bank account, to investing in the stock market, to buying new businesses and/or properties...

Now, which is the best use for that money, out of all those options? (Taking into account estimated return plus how risky it is.) If the property you own now is not the best investment for that money, then sell now, and invest the money in the best investment, according to your estimates and calculations...

I don't think there's any way of knowing with 100% accuracy what the best investment will be for the maximum return... All you can do is try to estimate the highest probable returns with relatively low risk. Pretty much that's what all successful investors do!

(If taxes and other fees are also a factor - as they can be with selling some types of investments - then you should take that into account in your calculation of possible returns...)

Cheers,

Dien

[MMacGillivray]

Ankesh -

Due diligence about the folks making the offers might be a good idea. If the offer seems way higher than market value, try to assess whether these folks can afford the price and make sure a valuable product goes through some kind of escrow.

Best
Margaret

Dan Kennedy Quote: "Most marketers underestimate the price elasticity of their offers."

Hi Ankesh,

Here are a couple of things I would consider.

#1 You said the property "made news".

- If this news is what is driving the demand, I would want to know how much longer it would generate interest for...and What specifically about the news caused the 2 offers

- Is this "news" that YOU control ie. Press Release...email blast etc. etc.
If it is something that YOU can control or Manufacture...Then your price is elastic.

#2 1st offer $65,000 ...2nd offer $243,000?

- Pretty large difference in perceived value? Or was the 1st offer just the standard "low ball" negotiation tactic?

- What evaluation criteria are your prospects using to determine the value of the property?

- Who is shaping that perception? How are the doing it ie. what medium?

#3 You asked "How do I find out if the prices will increase or if this is the best offer I can get?"

- Why not PICK YOUR OWN Price and figure out how to make it 10 times more valuable to your prospects.

Here's what I would do:

First: Without looking at the market...figure out How much You really want from the property and by when. (My Personal TARGET NUMBER)

Second: Look at other comparable properties and determine on average what the going rate for the property is.

Third: Look at the "TOP DOLLAR AMOUNT" that a comparable property has gone for; if this is possible to determine. (That is your BENCHMARK NUMBER)

Fourth: I would aim to BEAT the benchmark. As long as the price I got was greater than (MY Personal TARGET NUMBER) And or the (BENCHMARK NUMBER)
I would be extremely excited.

Fifth: Create An OFFER that is Perceived to be 10x times more valuable to the prospects

With Your Marketing Brain, Ankesh..I'm sure you can come up with ways to Increase the perceived value of your property while stimulating demand.

The words Scarcity and Urgency come into my mind....

You did say the property was..."One of a kind"... right :->

Duane Adolph
========

Ankesh Just found these words of Wisdom from Dan Kennedy in regard to price. I'll just cut and paste .

Mistake #2: Setting The Wrong Price. It is not true that the lowest price is the right price. Products cost more at the 7-11 than at the supermarket and everybody knows it, but many people are cheerfully willing to pay the premium for convenience. A book could be filled with similar examples from every business category, where consumers knowingly and gladly pay a higher price for a commodity because of some added or secondary value. Many factors must be considered before arriving at the best asking price for any product or service. You can, of course, proceed by testing one price against the other in controlled marketing situations. And once you have significant success at one price, you should test inching up that price. (Beyond that, there are some very sophisticated methods for setting prices - I'll soon be interviewing Marty Chenard on a Gold Tape about this very subject. DSK.) Here are a few quick price tips:

(1) Most marketers underestimate the price elasticity of their offers.

(2) Price is never the determinate factor; perceived value in excess of price is.

(3) You can sell at prices higher than your competition - for egs., by preventing apples-to-apples comparisons via bundling and packaging, premiums, other added value, proprietary branding, or emphasizing peripheral factors rather than the core product, such as guarantees .

(4) For many buyers, the monthly payment figure is more important than the total price There are two scenarios that permit demanding an exceptionally high price: one, when the popularity, need or desire for the product or service is at peak, and you are (perceived as) the only source --- for example, having a revolutionary new weight loss product everybody is talking about; selling a new car model made in very limited quantity. Two, when you are "selling money at a discount" i.e. offering thoroughly documented return on investment far in excess of the price.

http://www.dankennedy.com/cblog/inde...s/2005/11.html

Originally Posted by Ankesh

This may be one of the questions that has no definite answer. So I'll pose it as a poll.

If you own a real estate property and are willing to sell it for $125,000 one year back.

But you can't sell that property for over a year. But then, within a week, you get 2 offers.

First offer is for $65,000.

Second offer is a cool $243,000.

Obviously, you reject the first offer. But do you take the second offer? Or do you wait - expecting the market to become even hotter - with the recent activity?

(Assume that yours is a one of a kind property and there is no market comparison. Also assume that the recent activity is not a coincidence. The property has made news.)

How do I find out if the prices will increase or if this is the best offer I can get?

What would you do? Sell or wait?

(This is not a theoretical question. I actually face this problem right now - but its not for real estate. Your opinion would help a lot.)

[Ankesh]

Wow! Thanks everyone for making some excellent points!

A quick follow up post:

1. I do agree with "A bird in hand is better than 2 in bush." I'm most likely going to accept the second offer. But had about 5 days to make my decision in. Extra time just leads to trouble. All the extra time had me thinking about the possibilities.

2. Even though the "property" hit the news, I can't directly affect or control the news. My situation is like: a new McDonalds is coming to town and I'm the person who sells potatoes. News people will write about McDonalds - not about potatoes. There are one or two angles I can chase though. Had a reporter friend show slight interest. We'll see how it goes.

3. The first offer was based on multiplying the past income with a number. The second offer is based on future possibilities. Thats why the big difference. I myself think that the 2nd offer is quite good.

4. One idea I'm chasing is - auction. I myself don't have the skills or resources to setup a quick auction. (Ebay doesn't work in India.) So am seeing if I can find someone who can setup the auction. Will set the second offer as the reserve price. And probably will give a big cut of anything over the reserve price to the auctioneer. Will see if I can find someone like that.

Thanks for helping me crystalize my thoughts.

Ankesh,

You are in a nice position but if i'm the other guy and hear you're stringin' me along while you try to scratch out a better deal could make me walk.

First of all if he was smart he would've put a time limit to his offer.

If so and you still want to string him along then let Greed solve your problem.

Explain right up to the guy you're searching for a better deal but here's how YOU could win even if you lose.

First if you find a better deal tell him you'll give him a piece of the pie. Doesn't have to be too much but now you've put the guy in a position to get something for nothing. Greed, baby!

So now if you can't find a better deal you still win because you have an signed offer from this guy that's still attractive but also giving you the time to find a better deal.

Might work for you. Remember greed solves all your problems.
I learned that from Vic Mackey of The Shield.