When the previous buyer backed out

We get this a lot: We help a client write on a building. Someone else wins the auction and goes into escrow. The winner cancels during his contingency period. The listing agent comes back to us, offering to go into escrow on the terms we offered previously.

Very often, our client gets cold feet at that moment. The thought process is something like this: “Why did the first buyer back out? What’s wrong with the property? What if I buy the property and then find out I missed something and got a bad deal?”

While these feeling are natural, they’re totally unhelpful.

If you want to act like a professional investor, which is basically why our clients hire us, then you have to trust the process. The process is:

  1. Find a deal that looks like the numbers might work
  2. Offer a price such that the numbers do work
  3. If you get the property, conduct an extremely thorough diligence process
  4. Assuming everything checks out, close

Notice that nowhere in the above list do I mention what anyone else is doing. Why? Who cares?!!

Other people do stupid deals all day long. They also fail to do good deals for equally stupid reasons. If you’re going to make investment decisions based on what other people do, then you’re setting yourself up to achieve the same results other people achieve.

Being good at this game is about being cautious, calculating, unsentimental, and, most importantly, confident enough in your own preparation and judgment to ignore other people and pull the trigger when a deal looks right.