Last week I wrote about the values which we at Warburg have tried to embody in our culture and in the way we do business. Of course, principles are all very well in theory; it is only in action where you can judge how much sticking power principals really have. And there is no topic on which the rubber of principal more jarringly meets the road than the topic of money.
As agents, one of the most complex issues we face, again and again, is whether a handshake has a price. Once a buyer and a seller agree on a price and terms, should that be sacrosanct? In many other states, agents are empowered to draw contracts; in some of them, each offer is written up as a simple contract and the seller signifies his acceptance of the offer with a signature. Game over. No lengthy delays, no fights between lawyers about which clauses in each of their riders are objectionable to the other. The negotiation of the deal and its finalization are concurrent. That would be a beautiful world for most of us agents to live in (although, I get it, not so great for the lawyers!)
Not so in New York. While it is rare that attorneys, given time, will not resolve whatever contractual issues there are, the week or two (or these days, even three) during which the contract is being negotiated leave the property in limbo; with no signed deal, is it available or isn’t it? There are two schools of thought, both arguably valid. One is, if the buyer can change his mind with no penalty and walk away, why not the seller? The other of course is that an accepted offer is the negotiated equivalent of a handshake, and that it should bind both parties regardless of what other temptations might appear. While I understand the first perspective, I am more in sympathy with the second, although it is not much in fashion today.
For most sellers, temptation is relative. Once they have an accepted offer, they will stick with it if someone offers them $50,000 more. $250,000, however, is another story. It is really hard to leave that sort of money on the table, even if there is already an agreement with someone else.
Over the years we brokers have learned that there are a variety of dangers in switching horses. In a disproportionately high number of cases, as much as 25 or 30%, the second buyer flakes out and the first buyer is so angry that the seller is left with nothing. As brokers, we often find ourselves in the middle of the storm, blamed by the angry buyer if he loses the deal and by the angry seller if both buyers disappear. All we can do is advise that sellers stick with the deal they have, which is often not advice they want to hear with visions of sugarplums dancing in their heads when some enormous offer makes an appearance the day before they were to sign with Buyer Number One.
What rarely gets discussed is the moral question. Now I have to start by saying, in none of these cases is it MY money which is at stake. I would like to think that I would stick to my word, but a quarter million is a quarter million. Still, doing what you have promised to do IS the right thing. We increasingly live in a world in which values are relative, but in my opinion the notion that a man’s (or woman’s) word is his/her bond shouldn’t be a relative concept. It is not morality if you will stick for 50k but not 250k. That is just another sort of price negotiation.
Einstein famously said, “Not everything that counts can be counted; not everything that can be counted counts.” I’m with him.