I heard about an ex army man who wanted to sell his flat in Navi Mumbai for a price of Rs. 2 crores. This was in 2013. He did make some effort and the best offer that he got was Rs. 1.65 crores. He obviously did not budge. He was staying in Kerala and had ‘heard’ this price and was stuck to it. This is called Anchoring. Vivek Kaul has written more about anchoring in an article today..and that is at the end of this note of mine. Do read that too.
I told his broker that the gap between 1.65 and 2 was just too huge, and this is STUPID anchoring. He was stuck on this price because a flat in his building WAS SOLD for Rs. 1.80 crores about a year ago, and he thought that a 10% jump up was fair to ask.
He did not understand/ accept that the deal at 1.80 was a stupid comparison. This was a terrace flat, had some extra space and his neighbor wanted it for his son who was getting married. It was a flat which was fully done up in terms of interiors AND the neighbor wanted to connect the 2 flats INTERNALLY TOO. Fairly obviously this was a premium flat where as our friend’s flat was not touched at all – and about Rs. 20 L would be needed to make it livable, with just the bare necessities.
I told all this to him on phone (not yet met him)..and he is 78 years of age. So does the capital really matter? His expenses are much lesser than his indexed pension. He has lost his wife and children are doing well. Should it really matter what exact price he gets? I know not.
I have seen big – real big – transactions happening in a jiffy and small individual investors/ landlords struggling over their properties. If he dies his children will spend money to get it transferred to their name, pay stamp duty, etc. and then sell – which easily means another Rs. 10L of expenses.
Amazing what anchoring can do…read on…
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