Searching for Fools

I read Eduardo Porter’s The Price of Everything a few years ago. One of the sections that really rang true was titled “Searching for Fools.”  It was about how auctions are an effective way to identify who will pay the highest price for a particular item.

I love the idea of an auction and encourage my clients to employ this tactic during negotiations whenever possible.  The best deals I’ve ever negotiated have involved getting multiple landlords to bid for my client’s tenancy.  Whether it’s a desire to beat the other guy, secure a tenant to shore up their building, or just do a deal, when landlords feel they are under competitive pressure, they will respond with more aggressive proposals, faster response times, and more accommodation during the negotiation process (access to architects, contractor bids, etc.)

But the real estate process differs from most auctions in that long lead times are necessary to effectively employ this strategy.  Landlords understand that in the tenant’s case, the less time the tenant has before the lease expires, the more leverage shifts in favor of the landlord.  As the calendar moves closer to expiration, tenants have less time to deal with logistical issues, moving, and tele/data communications.

If having landlords bid for your tenancy seems appealing, I suggest employing an aggressive broker that isn’t afraid to wade into the middle of tough negotiations, starting the process early, and keeping an open mind regarding your options.  You’ll be surprised what a great deal you get.

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