I once chose a real estate course as an elective in college, on the premise that if pushing properties and houses were skills I could hone, it would pave the road to a fairly lucrative career upon graduation.
It seemed easy -- a few well-chosen words and ingratiating compliments and the money would begin tumbling in.
During the practice run where, the class had to role play as realtors and potential clients, I stumbled over an ottoman placed strategically in the center of the room and sent a cache of papers flying -- not to mention the potential buyers -- and in the process, sent a brass plant stand careening off a rosewood wall unit.
Picture Jerry Lewis circa 1963 on a tryout with Century 21.
But I did learn one cardinal rule during that course: Location was king.
No matter what shape the property was in, if it was located in a highly valued neighborhood or one that was destined for gentrification, then you could pretty much expect to receive at least 5 percent to 10 percent over the asking price after a furious bidding war.
The late shipping tycoon Aristotle Onassis had two rules for success: Always have a tan no matter what time of the year, and always live in the best neighborhood even if it's in the worst house.
Turns out that location can also influence an auditor's judgment.
A couple of inventive accounting professors from Cornell and Bentley College last week issued a report that showed that auditors were less likely to correct errors and misstatements when the figures in question were tucked away in footnotes, as opposed to being stated on the books.
"Information location influences reliability," was the mantra for the paper, which to prove its point, questioned a sample population of Big Four auditors as to how they would handle a client's underestimation of employee stock options if the client objected to making an adjustment.
One group was told that the client included the cost of stock options on its income statement; others were told that the cost was shown only in a footnote -- with the error being of identical size.
As it turns out, the percentage of auditors demanding corrections when the mistake was recorded on the books was far greater than when the error was recorded in a footnote.
A second experiment was conducted to determine if auditors were influenced by any subjectivity while valuing stock options. Afterwards, the footnotes/books reaction percentages were alarmingly similar.
The authors suggested that accounting standard-setter FASB may want to mull whether assigning relevant entries to footnotes may result in less reliable data.
I don't know how to respond to that, but if I walked away from that real estate course learning one thing, it was the importance of location.
That and the fact that a chance meeting between brass and rosewood was not a marriage made in heaven.
