We can all be easily influenced from time to time, especially when it’s someone that we trust. Our parents, our children, our closest friends, colleagues and co-workers can have an influence on how we live our lives, what we eat, drink, and, how we invest our money.
However, we must remember to rely on the professionals who represent us, or at least hear what they are saying. I trust my attorney with respect to my will, and every time I get a haircut and am asked “What are we doing today?” My response is almost always: “Whatever you think.” Some of you might think that is crazy, but it’s just who I am. We all have a higher priority for certain things in our lives, and some of us really do trust the professionals and their opinion.
I’m working a little bit against the grain with respect to my beliefs in representation and trusting professionals by stating this, but sometimes it can steer us the wrong direction – even if it’s the right choice. That doesn’t make any sense, so here’s an example.
A home is listed for sale at what appears to be a great value. It needs a lot of work, and that is apparent and properly represented. The buyer secures a real estate agent who agrees that the home is a great price despite the issues with the home. The buyer then contacts a home inspector who agrees to perform a home inspection. The home inspector doesn’t know what home values are, but that’s not the inspector’s line of work. No problem here. The inspector performs the inspection and sends a damning report with respect to some of the structural elements of the home. He advises that the buyer withdraw from the contract based on the amount of work required. To be fair, I am not familiar with any home inspectors who would provide advice like this, this is just an example.
The above stated, let’s assume that the home had a fair market value (without any structural problems and a light remodel) of $600,000. The buyer, unbeknownst to the inspector, had a contract secured in the amount of $300,000. The fictitious home inspector’s advice to withdraw from the transaction was based on structural repairs in excess of $100,000, a hefty sum indeed. However, a $300,000 purchase price and even $200,000 worth of structural and aesthetic improvements would leave over $100,000 in potential profit. You can use the same example in different scenarios. Perhaps your friend tells you that they would not advise putting down any more than $1,000 worth of earnest money on a real estate transaction – or they might advise that you offer 20% less than the asking price because that’s what they successfully offered on their home in Oklahoma. Different people have different advice, and all of it should be heard. Just make sure you are paying close attention to the professionals, family or friends with expertise in the specific markets in which you plan to invest. You might make the mistake of withdrawing or losing what might have been an excellent opportunity.