Friends Who Owe You Money Can Quickly Become Former Friends
Its pretty much common sense, or at least its been said a thousand times before, dont lend money to friends and family. What is often missed in that warning is that you should also not sell things to friends and family.
Here are a couple of scenarios. Your friends are over for a Christmas tree decorating party. Two of the guys know that you sell pre-owned designer mens suits on eBay. They ask you if you have any new stock because they could use a new sports coat. Sure look in the hall closet, see if you like anything. After five minutes both men return, one wearing a Hugo Boss suit coat and the other is sporting a Zegna blazer. Its the holiday season, youre all friends, and even though you know you could get at least $80 each on eBay for them, you only paid $4.99, so you tell them youll sell them for $10 each. What the heck, its gift giving season anyway. Then they announce their checkbook is in the car, so theyll pay you Tuesday when they see you next. Fast forward three months to March and they still havent paid you.
Or perhaps you know a friend is looking with his teenage son to buy a car for Junior. You have another friend who is a self-employed mechanic and is always picking up older cars and fixing them up. You mention to friend #2 that friend #1 wants to buy a car for his son. Mechanic friend was going to sell the car for $900, but since its a friend of yours, he tells you to tell them they can have it for $600. You disclose all thats right with it as well as all that will soon need repair. Friend and son drive the car, say they want it and will come over with money on Tuesday. They arrive on Tuesday with only $300 and tell friend #2 that they will have the balance paid off in 30 days and hoped hed understand. Four months later and lots of pulling teeth, friend #1 dribbles in an occasional $10 here and $20 here toward their $300 debt. Yet theyve had the car for months.
So what went wrong in the above cases? The friends (now former friends) never asked to borrow money (to give you the opportunity to not lend them cash, as youve been warned). The seller-friends were blind-sided with the sudden convenience of no money after the transaction had already taken place. Because it was a friend, cmon whats little leeway among friends, anyway? the sellers felt cornered and awkward to rescind the offer after they had already agreed to it.
The only real solution is to never, as in never ever, sell anything to family and friends unless you have cash in hand, at that moment. And dont feel obligated to give them a deal of a lifetime. If you could get a fair price for the item elsewhere, offer it to your friend at that price too. If you dont, you could be losing out on a whole lot more than income. Friendships and families are often severed because of transactions gone bad. Dont let it happen to you.