Wednesday, April 12, 2006

An analogy

I'm using American Football for this analogy purely because it works better than any other I could think of.

Your team is trailing by five points in the championship game with only seconds left on the clock. It is the 4th down and goal, but due to a sack on the previous down you are almost 40 yards from the end zone. The ball is snapped to the quarterback who sees the defenders bearing down on him. He has the option of a safe short pass, but it would be highly unlikely that the receiver could make it all the way to score. He sees his team mates heading for an underprotected end zone. It's risky, and the consequences of an incomplete pass or an intercept are dire. He considers his options and at the last possible moment puts up a Hail Mary pass. All he can do now is wait, and hope that his receivers can get there in time to save the day ...

A few weeks ago we put in an offer on a vacant block of land. The idea is to build our dream home, and a purpose-built place of business for my wife. After being messed around by the bank (Which Bank? Yeah, that's the one.) we finally received approval from another one, and at a better interest rate. The proviso was that our other block of land was to be sold prior to settlement. We found a buyer for the old block, and arranged a simultaneous exchange for both. One the proposed exchange day, the sale of our old block fell through, so both were cancelled.

Friday arrives and we have to make a quick decision. If we don't exchange on that day for the purchase of the land we will probably lose it. If we exchange but can't sell the old block then we will not be able to settle, will lose our deposit (around $40,000), and be back at square one. The vendors of the land agree to a 60 day settlement rather than the usual 30 days, but only if we exchange contracts that day. Our solicitors tell us not to do it, and if we decide to go ahead we would have to sign a statement to the effect that we were ignoring their advice. Should we take the safe option and probably lose the chance of owning the land? Or should we risk it and take a $40K gamble?

Well, we exchanged, and the clock started running. We now have 54 days to get everything in order, otherwise we may be dealing with a different kind of "receiver".