Looking Through the Wrong End of the Telescope

by Jeff Brown

Real Estate Investments Broker

Author website

This Texas trip has been both productive and instructive in so many ways on several levels. Sitting in a hotel room just a quick shuttle from Dallas’ Love Field, a dead pizza on the coffee table, I’ve been meditating on events of the last three days. I say meditating cuz that’s all I can do with the energy I have left.

The subject came up in a meeting earlier in the day — why some transactions fail. Specifically, why do some fail for reasons unrelated to either objective analysis, actual benefit or harm, or simply cuz one side, sometimes both, begin to care what the other guy’s getting? Though it used to make me crazy, these days I just watch to see how far some folks will go to ensure the other guy fails to get something he wants — as opposed to doing their level best ensuring he gets what he wants.

Here’s an example.

The buyer of a 4 unit property discovers through casual conversation, into what the seller is exchanging. The 4 unit seller is tax deferring his equity, a touch over $200,000, into 8 duplexes in another state. Because the seller’s broker gave the buyer’s agent info on those duplexes at his request, the buyer has also seen the info. No big deal you say?

It shouldn’t be.

The buyer though, sees it as something he’s never been able to accomplish. That guy is getting too much of the pie — or so reasons the buyer. Who really knows what generates this self destructive attitude?

How the hell can this guy take one little property and end up with almost $2 Million of brand new units? Who’d he hafta kill to make that happen?

So during the inspection period of their deal, Buyer decides he’s gonna stick it to Seller as much as he can. After all, he’s the one turning mud into gold, right? Why should he care about a few thousand bucks in unnecessary maintenance?

Buyer proceeds to pile it on, never forgetting how he’s only getting a lousy 4 units and this guy’s somehow secured the keys to the fairy dust vault. He finally goes overboard, and Seller shows him the door, taking the back-up offer for a couple grand less, albeit with a relatively sane buyer.

What really happened?

We see this every now and then. A principal on one side of a transaction begins to make decisions not based on how it affects them, but how it might benefit the other guy — which they are studiously endeavoring to avoid. Besides being childish, self destructive, and plain stoopid, that attitude is the cancer that kills more real estate transactions than you might think.

I call it looking through the wrong end of the telescope.

Instead of remaining focused on the big picture, an investor’s ego gets involved. Next thing you know they’re looking through the small end of the telescope, focused almost entirely on what somebody else is getting. The only issues the investor should care about are those directly affecting his Purposeful Plan.

I’ve asked dozens of clients at one time or another, if they would remember a lousy 10 grand five years down the road. Nine of 10 admit they probably wouldn’t. Then why act as if you’ve been mortally wounded cuz the other guy is kickin’ some impressive booty of his own?

I tell clients if the other side in a deal is getting everything they want, yet we’re still good to go with our Plan — it’s a good thing. Why do folks care?

Who knows? I’ve never figured it out. An investor walks away, or causes the other guy to, and keeps shooting himself in the foot. Over time, this behavior retards any meaningful progress towards retirement. Instead of making solid deals on Purpose, they execute inferior, often mediocre transactions. At least the other side didn’t benefit too much.

With rare exception, I’ve found when everyone involved leaves the table smiling, it means several things.

A second quick example

Your Purposeful Plan says it’s time for a tax deferred exchange. A buyer for your property has made an offer, and negotiations have moved forward. Then there’s a snag. The buyer is insisting on a price yielding you $200,000 instead of the $235,000 in net proceeds you have to have. (Why is it always, “I have to have…?”)

Your options are — 1) Take the $200,000 and run to your incredible exchange properties, as it’s a buyer’s market dummy. 2) Hold out for more money and kill the deal — this means you can’t get the killer deals your agent found for you.

Way to go Einstein.

The numbers on the properties you hope to buy with your proceeds show you’ll more than make up for the lousy $35,000 long before the first year passes. But for your ego, this would be a no-brainer. Several years later you’d be bragging about how you took less to make more — unless you decide foiling the other guy’s Plan is more important than executing yours.

Focusing your attention on what others may or may not be profiting from, is a sure symptom of looking through the wrong end of the telescope. It will ultimately do harm to your long term Plan.

Stop it.