“The Surprise is a somewhat aged man-o-war. Correct?
She has a bluff bow, lovely lines. She's a fine seabird: weatherly, stiff and fast... very fast, if she's well handled. No, she's not old; she's in her prime."
In author Patrick O’Brian’s novels, no one knew better the subtle details of the British naval vessel HMS Surprise than its longtime captain, Jack Aubrey. There’s a parallel in real estate. After years spent leasing, maintaining and improving a building, no one knows more about an asset’s idiosyncrasies than its owner. Aubrey cleverly used this information asymmetry to his advantage in the books and movie, especially when he was in trouble, but in real estate the value of information asymmetry is more nuanced.
Unlike most financial assets, real estate return expectations - especially future distributions - are tied to local market dynamics. This lends an advantage to in-market buyers that “can be more confident when bidding high” on an asset. New research confirms this. In rising markets, locals tend to dominate, and pay lower cap rates. But in times of declining value, the opposite happens. Sellers more often transact with well-capitalized outside investors who lack local-market informational advantages.1
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