On today’s show we’re examining why the stock market has fallen so quickly. If you go back to 2008 and 2009, when the market conditions changed in real estate, why did prices seem to drop quickly?
It turns out that when you make a decision to purchase any investment, most investors have a due diligence process that they follow. In our case, our due diligence checklist consists of two checklists. The first checklist is designed to kill the deal quickly. If the deal isn’t dead after the first checklist, then the second checklist kicks in. There are a total of more than 50 items on the two checklists. For complex deals, there are additional checklists that need to be adhered to.
Making a buying decision requires a lot of work. It’s a slow process that takes weeks, and sometimes it takes months in order to get to the point where all of the criteria are met.
By contrast, when we make a decision to sell, there are only two questions to be answered:
How much will we get for the sale?
When will we get our money?
Both these questions are relatively easy to answer compared with all of the effort associated with a purchase. The net result is that a purchase happens very slowly, but a sale can happen very quickly by comparison.
Host: Victor Menasce