Tips for Executing Good Trades and Transactions

I was dealing the other day with a son who was selling some USAF items he had inherited from his father. In working out the deal, it was apparent that a private transaction such as this was new to him. The seller was irritated that I would not “trust” him. This started making me “trust” him even less. It also got me thinking about trust. It is a complex concept. It is also really complicated because both parties in a transaction usually are total strangers. Even if the buyer and seller have interacted before, they typically have never met. This is important because neither party really knows how the other person will react if something goes awry. So, trust is really important and something that you ignore at your own peril.

What I like to do is build trust in transactions by creating an environment that “ensures” trust rather than “expects” trust. In other words, do things that allow the other party to know that you will do what you say you will do and if you don’t, they will be fully compensated. While you are at it, make sure that if something goes wrong beyond either parties’ control, both parties can be made whole again easily.

There are a lot of small probability events which can occur in a transaction. Individually, they are insignificant, but taken together, they can add up to a measurable risk. With careful planning, all of these risks can be minimized or mitigated. It comes from realizing that in these types of transactions, you make your own luck. Bad things happen, but really bad things result from poor preparation.

So, let’s go over a simple transaction and talk about all of the things that can go wrong and how they can be easily minimized or mitigated. Transactions on the face of it are pretty simple:

1) Buyer and seller agree on a price
2) Buyer pays seller
3) Seller ships item to buyer
4) Buyer takes possession of the item.

Negotiating a Sale - The first risk that occurs is seller fraud. The buyer faces a risk that the seller is misrepresenting what is being offered. The buyer should expect to receive a good description of the item, clear digital photographs which show distinguishing features, and have any flaws identified. The seller should expect to answer any buyer questions and provide substantiating evidence if requested. Both parties should remember that extraordinary claims require extraordinary evidence. Providing full and complete information is a crucial step to a good transaction and building trust. As a word of warning, if the seller is not interested in the buyer’s concerns before the sale, the seller will rarely be interested in the buyer’s satisfaction after the sale.

Accepting Payment - The biggest risk the seller faces is that the buyer will not pay or will fraudulently pay. Today, this risk can be fully minimized. The easiest way is to receive payment by PayPal. Payment is instantaneous, but fees are an issue. The buyer can also request payment by money order. With PayPal and money orders, payment is assured. Buyers can also receive payment by personal check. In that circumstance, the buyer should not expect shipment until after the check has cleared.

Another risk the buyer faces is that the seller will pocket the money and not send the item. If you are concerned, have the seller invoice you with PayPal, so there is a record of the transaction and what is being sold with an impartial third party. I don’t mind sending a money order or check if it is for a small transaction, but for larger deals, I am very uncomfortable sending money to a seller with no recourse if they seller reneges. With PayPal, you have an opportunity to dispute a fraudulent purchase.

Shipping the Item - Now we come to the part that generates a lot of controversy. If the buyer has successfully paid for an item, this item is now the buyer’s property, but the buyer does not have possession. The seller is now responsible for getting this item safely to the buyer. Complicating matters is that the seller now has to rely on a third party, a postal or courier service, to make the delivery. A lot of sellers like to say they are not responsible for loss or damage. Sure, the postal service can damage an item beyond the control of the seller, but more likely than not, damage, loss, or misdelivery will turn out to be a result of the seller’s actions. Many times when I have had problems, it has been because the seller 1) misprinted the shipping address, 2) packaged an item poorly, or 3) refused services such as insurance or tracking which were requested and pocketed the money. It is puzzling to me how many times I have purchased an item that was “so valuable” to the seller, but arrived poorly packed and trusted to a barely taped envelope or box. Sadly, many sellers seem to be of the mindset that once the item is no longer “their property” they could care less about it.

Postal service transport risks can be minimized with four easy steps:

1. Pack the Parcel Well - I like to use plastic padded envelopes. I usually also place the purchased item in a plastic Ziploc bag which helps prevent the item from being damaged from moisture and also further protects it from the postal machinery. I then make sure to tape the opening of the envelope for extra protection. If the item requires a box, I tape all of the sides. In this way, the item is protected from the packaging bursting when going through the postal sorting machinery. A well packaged parcel has miniscule odds of being damaged. 
2. Confirm the Address - I usually confirm the shipping address with the buyer to eliminate another error. If you use PayPal, it generates the address label and postage for you. As a final step, place clear tape over the address label so that it can not rub off. I generally take a picture of the item before I pack it next to the envelope and then take a picture of the sealed up envelope showing the taped label. In this way, I have a record of what I sent and the address on the parcel.
3. Request Insurance - If the item is exceptionally valuable or unique, I generally request insurance. In this way, both the buyer and seller know that if the item is lost or damaged, the buyer will be compensated.
4. Request Tracking - Tracking is generally inexpensive and it provides a record of the item being shipped and delivered. I generally scan the postal purchase receipt and any tracking numbers and send them to the buyer as a good faith acknowledgement that the item was shipped. 

Buyers Fraud - The seller faces a risk that the buyer will receive an item, but lie and say it was stolen out of the mail, misdelivered or never shipped. Providing tracking and insurance makes it fairly difficult to be successful lying about theft or damage. It also allows a third party, the postal inspectors, to evaluate such a claim. For items with insured valued over $200, a signature is required for receipt in the United States which further confirms delivery. Having someone have to sign for an item makes it much less difficult for the item to be misdelivered.

The debate really comes down to who pays for these services. The seller can make accepting the cost of tracking and insurance contingent on the sale or the buyer can request and pay for these services.  Of course, if the buyer refuses to pay for tracking and insurance, I believe the full risk of damage or loss falls completely on the buyer.

So, by following these simple steps, I believe that most of the risk can be taken out of trading.