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Thursday, September 08, 2005

Friends Who Owe You Money Can Quickly Become Former Friends

It’s pretty much common sense, or at least it’s been said athousand times before, don’t lend money to friends and family. What is often missed in that warning is that you should also notsell things to friends and family.
Here are a couple of scenarios. Your friends are over for aChristmas tree decorating party. Two of the guys know that yousell pre-owned designer men’s suits on eBay. They ask you if youhave any new stock because they could use a new sports coat. “Sure look in the hall closet, see if you like anything.” Afterfive minutes both men return, one wearing a Hugo Boss suit coatand the other is sporting a Zegna blazer. It’s the holidayseason, you’re all friends, and even though you know you couldget at least $80 each on eBay for them, you only paid $4.99, soyou tell them you’ll sell them for $10 each. What the heck, it’sgift giving season anyway. Then they announce their checkbook isin the car, so they’ll pay you Tuesday when they see you next. Fast forward three months to March and they still haven’t paidyou.
Or perhaps you know a friend is looking with his teenage son tobuy a car for Junior. You have another friend who is aself-employed mechanic and is always picking up older cars andfixing them up. You mention to friend #2 that friend #1 wants tobuy a car for his son. Mechanic friend was going to sell the carfor $900, but since it’s a friend of yours, he tells you to tellthem they can have it for $600. You disclose all that’s rightwith it as well as all that will soon need repair. Friend andson drive the car, say they want it and will come over with moneyon Tuesday. They arrive on Tuesday with only $300 and tellfriend #2 that they will have the balance paid off in 30 days andhoped he’d understand. Four months later and lots of pullingteeth, friend #1 dribbles in an occasional $10 here and $20 heretoward their $300 debt. Yet they’ve had the car for months.
So what went wrong in the above cases? The friends (now formerfriends) never asked to borrow money (to give you the opportunityto not lend them cash, as you’ve been warned). Theseller-friends were blind-sided with the sudden convenience of nomoney after the transaction had already taken place. Because itwas a friend, “c’mon what’s little leeway among friends, anyway?”the sellers felt cornered and awkward to rescind the offer afterthey had already agreed to it.
The only real solution is to never, as in never ever, sellanything to family and friends unless you have cash in hand, atthat moment. And don’t feel obligated to give them a deal of alifetime. If you could get a fair price for the item elsewhere,offer it to your friend at that price too. If you don’t, youcould be losing out on a whole lot more than income. Friendshipsand families are often severed because of transactions gone bad. Don’t let it happen to you.


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