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Sunday, September 14, 2008

"A Bird and 1/4 in the Hand" . . .

vs. Two in the Bush

There's an old joke about two hikers who encounter a hungry grizzly bear. The first hiker thinks he has to out-run the bear. The second, smarter hiker knows that he has to outrun . . his hiking companion.

In a nutshell, that captures the dilemma facing buyers trying to decide how much to offer for a home.

After all the Comparative Market Analyses ("CMA's"), number crunching, and buyer gut checks, the winning offer is . . . whatever is likely to trump the competition.

In a bidding war with multiple offers, that calculation is explicit. However, even when there is only one Buyer on the scene at any given time -- the typical case -- that Buyer must still guess the minimum the Seller will accept, vs. waiting for another, better offer.

A bird in the hand vs. two in the bush is a toss-up. So, my counsel to Buyers is to try to offer a bird and one-quarter or a bird and one-half -- that is, make the offer tempting enough that the incremental amount that the Seller might hope to get by waiting isn't worth the risk.

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