Sometimes it’s OK to Pay a Premium

Once upon a time (not too long ago), I participated in a chilly stand off between parties who really could have and should have worked things out. Sound familiar? Hey, it happens to the best of us, but this one was especially galling because all it would have taken was a tiny bit more from a buyer who got caught up in finding “the bottom”.  I single out the buyer here because, of the two, he was the one with the emotional wherewithal to be the bigger person, swallow his pride and up the ante to finish the deal.  After mulling this over, I am certain it would have been better for him, and here’s why: He planned to buy and hold, and when you plan to buy and hold, you do NOT have to be EXACTLY right on price.

Who among us has not seen this situation unfold?  Seller has his back to the wall. Buyer is wielding a strong upper hand. Then things grind to a halt as one party goes for that final straw.  Sometimes, of course, there are good reasons for walking away over small differences, but generally, when you are in it for the long haul, and everything else is right, conceding and moving on yields the greatest reward.

You may be wondering where I get off making these kinds of judgments on other people’s deals.  The truth is I did not press my opinion in this case when the seller wanted more than the buyer was willing to pay. In retrospect, I wish I had. I wish I had pressed him a little harder because he and his family would have enjoyed that property through several market cycles, and the sting of that early premium would have faded into oblivion.  I should have pressed harder.  Next time I will.