It’s likely not a tremendous surprise to you given our line of work, but here on the Refined team, we like the game of Monopoly. True, it isn’t the most challenging game from a strategy perspective and some of it makes no sense in real life.
“You’ve mortgaged a property so now you can’t collect rent? Come on Parker Brothers, get real.”
One of the aspects of the game that does hold true to real life is what happens if you’re ever involved in buying a property in an auction. You and another player (or two) are bidding against each other for the deed to Atlantic Avenue or some other brightly coloured piece of property.
The comparable situation in real life to a Monopoly property auction is of course buying in a multiple offer situation. The property is for sale, you want it, but so do other people.
The Monopoly auction format is a bit simpler compared to how we buy property in multiple offer situations in real life, with price being the only element considered. Nonetheless, even with this stripped down approach, Monopoly nailed it when it comes to the aspects that impact the eventual sale price of a property.
Here’s what true in Monopoly AND in buying real estate in real life.
How wealthy am I? Perhaps you didn’t notice I’m wearing a monocle.
The first aspect of the game that holds true to life when it comes to buying in a multiple offer situation has to do with your financial resources.
- In Monopoly, one player may have more money than another and regardless of how much the poorer player wants that property, the wealthy player can simply outbid them and get the property.
- In real life, one buyer will also often have more money than another buyer. While other factors such as deposit, closing date and other conditions can influence the appeal of an offer, in many cases if you throw enough money at a seller, they will agree to almost all other aspects of the offer.
In both Monopoly and real life, not all budgets are equal and if you don’t have the money to keep raising your offer, the buyer with the biggest bank account often wins.
No, it’s absolutely worth that much to me.
The second aspect of the game that is true in real life as well is that the price a property is subjectively worth can be quite different than the price it is objectively worth.
- In Monopoly, one player may look at the $200 purchase price for Reading Railroad, consider the fact that they own other railroads and happily pay two or three times the “list price” in order to start charging more when players land on any of their railroad properties.
- In real life, one buyer will look at a list price on a property and begun adjusting it in their mind based on its proximity to their closest friends or family, it’s location in a desirable school catchment area or a short commute to work, or the layout that permits a home business to be expanded. All of these individual considerations, whether emotional or practical, can influence the financial appeal of a property.
In both Monopoly and real life, one buyer may see more value or utility in a property than another buyer. While there is an objective price based on the various attributes of the home and market data, the subjective price changes based on the buyer’s situation and can be quite different than the objective price.
Right, I saw that. Does it matter?
The final aspect of Monopoly that is true in real life as well is that having knowledge isn’t the same as having the wisdom to know how to use that knowledge.
- In Monopoly, one player may look a property for sale and consider its value given their future strategy and plans. It may make sense to buy a property in order to prevent another player from completing a set or from owning too many properties in a row on the board. Other players may not see what is coming or understand the value of the property in the same way.
- In real life, one buyer may take the information provided and consider it in light of other information. An informed buyer may realize the easement on the property would make an extension or addition not possible and adjust the value accordingly.
In both Monopoly and real life, one buyer may consider more nuances to a property. We sometimes operate under the mistaken belief we all share the same knowledge and understanding about a property – or have realized the meaning of the information that was provided. In many cases this is not true. A buyer may not understand the impact of what has been shared and bid too low or high for the relative value to their situation versus other buyers’ situation.
While Monopoly is by no means a true representation of buying and selling real estate in real life, when it comes to the auction process in Monopoly, it is remarkably similar in terms of the aspects that impact a sale in the real world.
If you’re keen on making the right moves when it comes to buying a home, we’d love to make it happen. Get in touch with us here and we’ll do our best to help you pass GO as quickly as possible!