Problem

Mr. Thaddeus Warren wants to know whether or not to accept or reject an offer to sell three commercial properties which has a potential profit or loss in the event of compliance or non-compliance with the terms of the conditions on a timely basis.

Objectives

To determine the most appropriate means to satisfy Mr. Warrens clients offer to sell real estate properties through maximization of profit and minimization of losses.

Area of Consideration

Mr. Thaddeus Warren owns and operates a real estate agency which specializes in finding buyers for commercial properties. Warren was approached one day by a prospective client who owns three properties which he wants to sell.

The prices of the properties are as follows:

Property Price A $ 25,000 B 50,000 C 100,000

Warren will receive a commission of 4 % on any of the properties he will be able to sell.

The conditions in the selling of the properties are as follows: Property A must be sold first within a month, if not, the entire deal is off, no commission and no chance to sell B or C, If property A is sold within a month, there is a commission on A and the option of 1) stopping at this point; or b) selling either B or C next under the same condition, If the sale of the first two properties is successful, there is the option of selling the third.

The selling costs and the chances of selling each property at the prices set by the client to be: Property Selling Costs Warrens Assessment of Probability of Sale

A $ 800 0.7 B $ 200 0.6 C $ 400 0.5

The ease and difficulty of selling each property is independent of each other.

Questions: 1. What are the alternative courses of action available to Mr. Warren? 2. Make a decision tree showing the decision and action path available to Mr. Warren in selling the property of his client including the financial gains and losses using the probabilities.