S.E.C. Real Estate Observer

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I have been railing at meetings that not enough COAGULATION thinking is used in creating transactions. So… I guess I’d better tell you what I mean so you can utilize the strategy.

The concept is simply combining more than one person’s transaction desires and capabilities to cause the required benefits to go to all involved. (It’s a sort of shred-out from the “Stone Soup” process and the “Zeckendorfing” process.)

If you, or a client, have the desire to acquire another’s circumstance, but you have only half of what it takes to make the other side happy, you need to borrow, buy, partner, or subordinate to someone who has what is needed. Nothing new, right?

Sometimes transactions are made where a vehicle is passed to one side which isn’t really what is wanted, but is taken to get the other benefits in the deal. (This is known as a “Must-Take.”)

When there is blood running in the market place, just like in home foreclosures today, some otherwise unacceptable vehicles can be used to acquire equity where the motivation to get off the loan allows the other side to be more open as to what represents his diminishing equity.

So credit and/or cash from one party married up with knowledge and capability, and other types of equities from others, can, many times, produce benefits for each party, which are much better results than each going separately toward their objectives. Pretty simple; done all the time, right?

NOT ENOUGH! We pass by solutions for our clients all the time because we don’t think COAGULATION.

I’m currently working with a frequent S.E.C. Guest who is making (numerous) proposals to motivated home sellers and trying to acquire discounted houses. I suggested he would increase his successes if he used other-than-measurable equity as part of the proposal in lieu of just bludgeoning with cash. It might allow the Seller to save some face/ego. So some of my immeasurable portfolio may be coagulated in. Obviously, 40 acres + $40k cash sounds better to some than $60K cash, especially since the seller has $150K in it and he has family challenging his IQ in the background. All kinds of interesting, even fanciful concepts can be mentally assigned to the 40 acres in lieu of taking a hit.

I see circumstances pass by in production meetings that just need the right combination of benefits to cause a deal, and those ingredients are right there in the meeting and only need to COAGULATE into a satisfying transaction for all parties. The benefits available in the first instance can be configured in various ways to make each of the contributors to the COAGULATION get the results each of them desire. Neither the organ grinder nor the monkey could make a living without the other.

In the “Stone Soup” approach, we borrow all the vehicles in the market from which to carve out sets of benefits to satisfy each person’s objectives. In this more limited similarity, we just find the two or three players who have the ingredients desired by the other side and COAGULATE just those few. However, if we pass opportunities to cause transactions because we don’t have all that is needed, or the right stuff, or the knowledge or talent to make it work, then no one wins.

If I were not on the road; if it was not on the weekend; or if I was not going off to golf, I would remember some much better examples of closed transaction. But hey!-you have an IQ-see if looking through the COAGULATION window can work for you.