A bird in the hand….

“A bird in the hand is worth two in the bush” asks us to consider whether keeping what you have is better than taking the risk of getting something better which may come to nothing.

In financial planning we are often faced with this type of dilemma. A client emailed recently:

“We are trying to sell our dad’s house. It’s up for £500,000. The best offer on the table is for cash at £470,000 but we want to hold out for £480,000.

The house does need money spent on it including a new bathroom.  My brother thinks we can do better and we might.

My question to you is do you believe we are entering a recession in the next 3-6 months, as this will affect the market. The estate agent thinks we may be.”

So, they are in a bit of a quandary and do not know quite what to do. But the answer is simple, isn’t it?

If in doubt, do what is likely to minimise future regret.

The first step is to ignore the “economy” red herring. Anything and everything can and will happen over time. No-one ever knows what comes next. Never. Fact.

Next, ignore the £500,000. It was a tainted guess. Every property is unique, the true value is not known until the sale is complete. An estate agent’s initial job is to get you to sign up with them – they are going to aim high. Their second job is to get you to agree a sale price – they are going to aim lower to get the sale done. They only get paid when the sale completes. They want the sale to complete. Fact.

So, ignore the economy and the estate agent and think about this:

1. Only one worthy offer exists. Future offers exist only in your mind.
2. £470,000 is a significant sum. To anyone. We are not flipping a coin where you could win £5 extra or nothing at all. There could be big consequences.
3. If you accept £470,000, you get £470,000. Is that enough to get done what you want to get done? If not, what is, why and can that be found elsewhere?
4. What more does the extra £10,000 you are thinking of holding out for get you?
5. If you accept £470,000, how would you ever know what more you could have had?
6. If you reject the offer, who knows what might happen next.
7. There could be a higher offer.
8. Or a lower one.
9. Or no offer at all.
10. How would you feel if you ultimately accept a lower offer having rejected a higher offer?

Don’t the chances of regretting rejecting £470,000 far outweigh the regret of accepting it?

Doesn’t that bring us to a rational conclusion?

The bird in the hand is always worth more than two in the bush?

future proofing your finances

advice@townclosefp.co.uk 

Town Close are expert financial planners. Our goal is the same as yours – to help you do the things that are important to you in the time you have remaining.