What Do Dollars Have to Do With Value?

Value is subjective to each party of any real estate deal and value doesn’t have to be determined in dollars. Today people have been taught that the dollar is the only way to determine value. Let me give you an example of what I mean. When you go to the grocery store and go through the checkout lane with your chosen product that costs nine dollars, you give the clerk a twenty dollar bill; you are expecting eleven dollars in change back. This is what people today have been taught how to determine value, in dollars.

Dollars don’t have to have anything to do with value, here is an example. A lady who lives in my area was struggling financially, having trouble paying her rent every month because she was unemployed and couldn’t find work in her field. This lady was dealing with much stress because she owned property in New Hampshire that was vacant land that didn’t make her a penny. As a matter of fact, the cause of your stress was because the property taxes for her property in New Hampshire were due and she didn’t have the money to pay her property taxes. She had a real dilemma. 

One day a real estate investor she met offered to take the property she had in New Hampshire. She was eager to hear what he was going to offer for her property. When the investor made his offer, she was shocked at what he was offering. The investor had listened closely to her tale of woe during their time together so he made her an offer for the property. He offered her a used laptop computer for the property in New Hampshire, even up, with no other boot (more cash) included which she eagerly accepted. The reason she accepted his offer so quickly was the property cost her money every year and didn’t bring her in one dollar. With the laptop computer, she could start her own paralegal business that would generate a comfortable income for her. With her new laptop computer, she quickly got back on her feet and had enough business that she soon hired six employees to do the work for her firm.

This story is proof that dollars have nothing to do with perceived value. Like I said earlier, when you are negotiating with sellers you must offer them something they like better for their property than what they are giving up. This was one of the most profitable lessons I ever learned. Cash is NOT what every seller wants, they just think they do and it is your job to find out what it is they really want the cash for from the sale of their property.

Let me give you another example. A person I know had a nice 3 bedroom 2 bath, two story colonial house he and his wife lived in. One day his doctor told him that he had a serious heart problem and can no longer climb stairs. A fellow real estate investor he knows told the person with the heart condition that he has a smaller two bedroom, two bath single story house in a great area he would be willing to trade for the 3 bedroom house. They made the trade even-up. The man with the heart problem got a house that works much better for him and the investor gets a house he can rent or sell for more and hopefully make a nice profit. Everyone wins and dollars had nothing to do with their decision to make the trade, the use was what was needed.

You must always offer every seller something they like more than what they are giving up if you want to buy the sellers house.

Check out my website www.LarryHarbolt.com and listen to my podcasts found on my website, Face book or on iTunes called “The Real Deal Podcast with Larry Harbolt”.

Happy Investing

Larry