One of the fundamental principles of investing is that all the numbers we use to track our investments from day to day are estimates. In reality, we never know what a non-cash asset is truly worth until the moment we exchange it for cash. Or, in a slightly more folk-lyrical way, “You don’t know what you’ve got til it’s gone.” (Are you now humming, “They paved paradise, and put up a parking lot”? If so, mission accomplished.)
Our recent adventure in selling the Jeep reinforced that message quite a bit.
What Did We Think The Jeep Was Worth?
Well, around when we were debating whether or not to keep the Jeep listed as an asset on our balance sheet, we had it booked on the Kelly Blue Book assessment of the Jeep’s worth – $7,400. In truth, we both knew that the Jeep had some issues. Any new owner would likely want a new top since the current soft top was starting to leak. They would probably also want a new cd player since the cd player in this Jeep hadn’t worked in at least 5 years. The paint was very chipped from years of highway driving, and there were scratches on the doors from where Mr PoP had taken them on and off over the years to drive around doorless.
Not to mention the darned thing was filthy – inside and out. Mr PoP took pride in the fact that the Jeep was “au-naturale” and that its only wash during the 7 years he owned it was a rinse-off to get all the salt off after he drove it up north during the winter. The layers of grime inside and out were thick enough that I wasn’t sure how well it would clean up after all this time.
Mentally, I had accounted for the fact that I wouldn’t be surprised if we had another $1,000 – $1,500 in write downs when we actually sold the vehicle. And Mr PoP had done the same. In fact, in our He Said/She Said on taking the Jeep off the balance sheet, Mr PoP said,
“I have serious doubts that the Jeep will fetch anywhere near its KBB value on the market, and don’t want to be caught short when the time comes to get rid of it.”
Going into this, it’s safe to say we both were going to be pretty happy to get $6,500+, but not insanely surprised if the final sale price started with a “5”, either.
Expectations Low, But We Had To Try
But we still wanted to get as much as we could out of it, so we spent some money and some time, and got the Jeep in as good of a condition as we could. About $200 covered cleaning supplies, stuff to make the paint as nice as possible, a cheap-o buffer tool, a couple of light bulbs to replace ones that had burned out, a steering wheel cover, and some microfiber cloths.
There was also a LOT of elbow grease that went in. I attacked the interior – carpets, upholstery, and plastic fixtures. The color of the dirty water and cloths that were coming off of this cleaning job was just disgusting. There were years of dirt inside. (At one point Mr PoP tried to claim the dirt was a protective coating against sun damage, but I wasn’t buying it.) Mr PoP attacked the exterior – cleaning, then removing the oxidation of the paint, waxing it, getting the fenders and bumpers as black as possible, and making the wheels and tires shine too.
Then, we took it to the beach and took some pictures to show it in the best light possible. We posted it on Craigslist for $6,500 and went to bed.
What The Heck?
In the morning, we discovered Mr PoP’s phone had been blowing up all night. Dealers calling and texting from hours away offering cash for a quick purchase. Clearly we had undervalued the Jeep by asking for that price, as sight unseen offers were higher than asking. Mr PoP texted most of them back saying he needed to re-evaluate what it was worth and would re-list it that evening.
He hemmed and hawed over the Jeep pricing for the better part of that day, and finally convinced himself that it was in “Good” condition on KBB (I had been using “Fair” due to all the little issues that annoyed me about the Jeep), which brought the KBB up over $8K. Then, pretty confident that we had found the floor for the Jeep’s price, wanted to see if there was a ceiling. He listed it for $9K that night, and again, we went to bed.
The inquiries were a little slower to come in, but after a day or two Mr PoP had several interested people who wanted to come see the Jeep. He was picky, though.
The Actual Sale
The first person he chose to have see the Jeep was someone who seemed like an ideal buyer – serious buyer, all cash, and had been looking for a Jeep like this for several months. The buyer arrived on time to the appointment Mr PoP scheduled, took it for a quick test drive, and within an hour we were filling out the title and bill of sale paperwork and I was counting out 90 $100 bills on the hood of the car.
It was, perhaps, the easiest car sale we’ve ever had, even though we’re half sure we might have left a *little* bit of money on the table selling it to the first buyer. (Optimal stopping is something the famous secretary problem gets into. For the nerds out there, the idea behind the secretary problem is that to find the optimal stopping point in a search for your best choice, you’re best off to look at, but discard the offers of the first 37% (1/e) of interested buyers, and then take the next offer that is higher than any of those offers. Mr PoP did some sorting with the applicants – choosing to see the buyers he thought were most serious first, so the condition that the order be random wasn’t met for us and this would have changed the results. So sadly, I was denied the opportunity to test the secretary problem results in real life.)
But in the end, we were thrilled to have $9K in our hands, and the buyer was thrilled to have the Jeep. The only person not thrilled was one dealer that lost out on buying it the first go-around and retaliated by telling Mr PoP, “Well… you’re dumb.” Indeed. If “dumb” is ending up with an extra $2.5K in our pockets, I’ll take my dumb husband any day of the week.
As much as we estimated the value of the Jeep using KBB, and then mentally discounted it for all the flaws we saw in it, we truly had no idea what this asset was worth until it was gone*. But the best we can do is continue to make these estimates and keep on going.
What are the assets that you have that you’re the least sure of their value? Do you have any methods that help you balance a conservative estimate with a “fair” value?
* Just in case you think we undervalue all of our cars, trust me that this was definitely not the case with the last car we sold before this one where I thought we would get $7K and we ended up with $5.5K.