The last part is here: Contract - The fairness of the Whites
If you have traded in stocks and shares, you would have come across this phenomenon. But, not many people managed to learn from this tool. Simply because either the traders are too early or too late. Only after the event, then the traders realised the gaps have happened. But, the traders were seldom part of the fun.
The tempo of stocks and shares trading is way above that of the land trading, hence, not many opportunities to see these gaps in land deals in real life. Coupled with the fact that the land transaction volume is usually low, many gaps are masked by the general trend of the market. There is therefore a need to come out with a methodology to handle these gaps.
Gaps are extremely profitable.
Land is different from shares. In shares, there would be too many shareholders and each holds identical shares. They will deal with you only through the price mechanism. Land deals are different. Each land, property or building is different. Some have good conditions, some have poor conditions, some have restrictions, some are near the road, some are rural and some are irregularly shaped. Each land simply has too many variables and factors influencing the final selling price. Coupled with the fact that the seller is only an individual, it is thus very easy to play the game.
Land ownership is one of the most expensive assets a person can hold. Hence, he can at most hold a couple. With the fact that these lands are seldomly traded and unupdated present market condition, the owners were extremely inexperienced in transacting a good price. Further the so-called seller agents are turn-coats of the monied buyer. The game is badly one-sided. Of course, one feels bad about reaping the sellers off. But, do rest in the comfort that as a buyer, you are already a late comer in the land game. The land prices have already risen to stratospheric level and you have only just begun. So don't worry too much about fairness. You as a buyer is already unfairly disadvantaged.
There are many reasons behind why the seller wants to sell the land. It could be gambling, no income, illness, sudden need, encashing a good buy and etc. I am not going into any of these, the seller wouldn't tell any way.
Say, for example, a land costs $100. Through very careful survey, when you decide to buy you are already willing to buy the land at its offer price of $100. If this is your first deal, you would be slightly disadvantaged. Trust me, you would show too much interest and the price you finally deal would be bad. Fortunately, you are helped by your initial careful survey, the land is already considered reasonable even at its original selling price. Any discount is considered your year-end bonus.
You don't know if the seller is desperate or still strong. You have to assumed that he is weak. If you return an offer of $80 (20% down), you will normally end up buying at $90 (10% down, mid-point). If you return an offer of $70 (30% down), you will normally end up buying at $85 (15% down, mid-point). Some time ago, I tried returning an offer at 50%. It was a disaster, the seller smelt my insincerity to deal, he stopped bargaining and firmly stuck to his original selling price. I ended up buying the land only at $88 (12% down), hardly any big deal.
Depending on the situation, return a price between $60 to $70 (40% - 30% down), the seller would be very stuck. This return offer is so painful that usually the seller can't sleep. This is a price that the seller would sweat to no end. It is painfully low but yet not low enough for him to feel insulted. If the seller is desperate and he will be sleepless for 30 hours and then he will collapse and gave in. You might end up buying the land at 30-40% discount from its original price. You have achieved a gap down. At its worst case, you will still have a 15-20% discount (100%+70% /2 and 100%+60% /2) from the original selling price. Not too bad.
Sometimes, it is very hard to return at such low price, you will feel bad vibes, ignore these feelings, you need to stay humble and repeat that mantra to the seller agent that you are very poor and the banks are not-yet-your-good-friend. Your seller agent will become your turn-coat in no time. It is extremely difficult to reject a monied man no matter how poor. LOL.
The cunning Asians of course are too smart as they have enough practice.
Caveat Emptor
A friend once asked me why don't I go for the kill since I know the seller is weak? I gave her a good tongue lashing. Never work the seller to the ground. It is very cheap for him to buy poison to do you in, your land would be useless for years to come. It is also too easy for him to buy cement powder to pour down the sewerage on the day of your taking-over. Never play the dangerous game. SunTzu said it is always wise to block three sides of the encirclement leaving an escape route of one side (your desired escape route for the enemy). A standing-to-fight-till-death enemy is worth 10-1 odds. So don't hurt yourself even if you are winning easy.
Be that most poisonous cunning smiling despicable me.
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