This is me from today’s Arizona Republic (permanent link):
Communication a good reason to use Realtor
Why do you need professional representation when you buy or sell a home? It’s not because of the Multiple Listing Service. As we have seen, Realtors can put a transaction together in ways you hadn’t foreseen. More importantly, an experienced Realtor knows how to keep your transaction from falling apart.
My wife had a house close on Dec. 22, just in time for Christmas. She was the listing agent, and the house sold in 21 days. The buyers came in without a contingency on the sale of another home. But they were coming from out of state, and their communication with their lender was beset by delays.
The sellers were buying their next home in Boise, Idaho, and that transaction was contingent on the sale of their home in Arizona.
Without discussing the date with either my wife or with their buyer’s agent in Boise, the sellers scheduled their closing in Boise for the same day as their closing in Arizona, Dec. 15. They scheduled their movers to deliver their furniture on that same day. And they invited their whole extended family to spend the holidays with them in their new home.
Now God loves the uninitiated in real estate transactions, and he graces them with the unshakeable faith that things always work perfectly. Especially with out-of-state buyers. Especially with delayed and incomplete communication with the lender. Especially with contingent sales. Most especially with simultaneous closings — in two states.
Consider the disclosure chain: The buyer’s lender to the buyer’s agent to my wife to the Boise buyer’s agent to the Boise seller’s agent, with my wife also keeping the lender on the Boise property in the loop, and with each Realtor and lender keeping their clients and the title companies up to date.
The buyer’s lender was late, making everything else late, with dozens of phone calls among the parties to keep everything together. Everything closed a week late, barely averting the disaster of a huge extended family spending Christmas in a motel.
Who needs Realtors? That’s easy.
Anyone who doesn’t do this job every day.
Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate marketing
Craig Blackmon says:
Is a realtor the ONLY professional who can provide guidance to a home buyer or seller? Can’t an atttorney knowledgable in the area also assist? Admittedly, in your scenario above, an attorney is unlikely to be in a position to provide the same degree of handholding necessary to keep everyone as informed and as comfortable as possible. However, the attorney could have explained some of these contractual intricacies (like contingencies) and helped all parties to better understand the risks associated with such a complicated deal.
Moreover, at what cost does a realtor provide this service. In your scenario, there were three sales. If each listing agent worked on a 6% commission, and each house sold for $400k, then the scenario above incurred $72,000 in transaction costs relating to the agents’ involvement. That’s a lot of dough. An attorney can provide this type of service (but not access to the MLS) for a lot less money.
January 5, 2007 — 9:56 am
Kris Berg says:
Greg – Great post (insert sound of deafening applause here).
Craig – The coordination aspect Greg spoke of is but one of the roles an agent plays, as you well know. And I won’t even attempt to get into the flaws in your math.
January 5, 2007 — 10:50 am
NYCJoe says:
Craig – I wouldn’t exactly hold my breath waiting for a response. I’ve been asking essentially the same question on other threads to no avail.
I’ve used attorneys in my previous transactions quite effectively.
I also think Kris has a point – 6% on a 400K house is 24K. Times two houses is 48K. Where are you getting 72K from? Are you including some (expensive) closing costs in there somewhere?
January 5, 2007 — 11:03 am
Craig Blackmon says:
400k x 6% = 24k commission for each of the three transactions (buyer’s sale of their house, sale at issue, seller’s purchase of new house)
24k x 3 = 72k
The math is pretty simple. Sure, there are a LOT of assumptions, but the point is that agents can cost a lot of money. Am I off base with that observation?
As for the roles played by agents, sure, they do many, many things — I don’t deny that. But the original post concludes that EVERYONE needs a realtor to sell or buy a home. That is not the case — there are other professionals who can fill some of the roles played by an agent (and, in fact, can do a better job in doing so, as an agent cannot legally practice law and the sale is a legal transaction). The remaining roles can be filled by the parties themselves, particularly if they have a resource to whom they can turn.
January 5, 2007 — 11:05 am
John says:
Attorneys have been whining about how they’re left out of the real estate biz for years. They also whine that realtors do nothing more than fill out contracts. And yet I see very few attorneys ever handle complete real estate transactions.
That’s because the smart ones know their place and realize that while they may know the law surrounding contingencies, they may not be aware of the customary practices, marketing, setting the price, dealing with repairs and a whole host of other crap that realtors have to put up with. Filling out a contract is but a small part of the transaction.
That there are the Joes of the world, who may or may not have any actual experience but go around proudly claiming to be the experts who can do it themselves. Well good for you! Some people have a full time job and kids,etc… and don’t want to do it themselves.
I’ve got a tip for you “Joe”. Why don’t you go to law school and this way you’ll be able to cut out one last middleman, your lawyer. If you’re up to it, why not also get a mortgage license and handle your own lending.
January 5, 2007 — 12:32 pm
Todd Tarson says:
Still Craig, it is not like one person is out the $72 grand or whatever the final tally that is paid out to the professionals.
Sellers make agreements with professional representatives for the service they provide. Sellers do this by ‘choice’. No one holds a gun to the head of a seller.
If you are looking to save people some dough from their sales proceeds, great. Ask buyers to negotiate a flat fee agreement with their buying representative to lower the cost to the buyer. Ask the sellers to negotiate a lower listing agreement. But quit making silly assumptions that have no bearing on what the author wrote in the article, as real human beings enjoying liberty in this country are free to make any cost arrangement they feel is fair for services rendered.
Your view reminds me of a quote from the movie Caddyshack… “You don’t have to go to college. This isn’t Russia. Is this Russia?? This isn’t Russia.”
Just replace the college thingy with “you don’t have to pay 6% listing fee’s.”
January 5, 2007 — 2:17 pm
Tim says:
“Filling out a contract is but a small part of the transaction.” –John
With all do respect John, for such a small part of the transaction as you suggest, it has THE most impact legally and financially. I’m certain Craig has many stories of agents practicing law by writing their addenda poorly that ends up costing the client a lot of problems. Unfortunately, as an escrow company owner, sometimes our office has to explain to borrowers or sellers that the language in which their contract was written ended up costing them more. I’m no attorney, but I certainly have had my share of contracts to read at our office that would make you pale—ranging from hysterically funny to absurdly foolish. More often than not agents provide many good services, but gosh, there are some really awful zingers in the group.
I wouldn’t characterize Craig’s comment as whiny. I’m certain that you didn’t want to come across similarly.
January 5, 2007 — 2:29 pm
NYCJoe says:
Craig’s post was not nearly as whiny as yours was, John.
Please show me in my comment where I claimed to be an “expert”. I simply said that I’ve gotten to the point where a buyer agent doesn’t provide much additional value to me, if at all. I’d much rather get that extra 3% back from the seller than have it go to someone that I don’t need.
Because I understand what it is that I do well and what my lawyer does well. Going to law school and paying tens of thousands of dollars in order to save a couple grand per transaction is not my idea of a good return.
But, maybe you see it differently.
So… I can lend money to… myself?
Here’s a tip for you, “John”. Stick to what you do best. Debating is certainly not it.
January 5, 2007 — 4:20 pm
Greg Swann says:
> Can’t an attorney knowledgeable in the area also assist?
In Arizona, attorneys almost never work on residential real estate transactions. Every attorney-involved transaction I’ve ever heard about has been a disaster — although the stories probably improve, as stories will.
In this particular instance, an attorney would have either bankrupted the clients in six-minute billing intervals or ruined his practice by continually interrupting better-paying work. Or, much more likely, caused the transactions to fail by being unavailable and/or confrontational. Note also that there would have been a minimum of two attorneys, one in Arizona, one in Idaho. In any case, there is no substitute for a Realtor in this scenario. Only working Realtors could have held the whole thing together.
> However, the attorney could have explained some of these contractual intricacies (like contingencies) and helped all parties to better understand the risks associated with such a complicated deal.
This would be in contradistinction to what? If you’re not working 50 or more represented transactions a year — in other words, working as a Realtor with a law license — my thinking would be that a working Realtor would know much more than you about what can go wrong in real life and how to avoid it.
> In your scenario, there were three sales.
Two.
> If each listing agent worked on a 6% commission
They didn’t. Cathy listed for 5% — repeat clients. The purchase in Boise was a new build. My guess would be 3%, and that would be unavoidable with or without an attorney. Your prices are high on both houses, not that that matters.
> An attorney can provide this type of service (but not access to the MLS) for a lot less money.
Undoubtedly not — not in this case, and probably not in any real life represented residential real estate transaction. The time commitment is too huge, and the hourly rates of attorneys too high. Even then, we are presuming that 100% of your clients will successfully close a transaction or cheerfully pay your bill when they don’t. This is not how represented real estate works.
The work an attorney can do cheaply can be done by a title company in Arizona without an attorney: Cut-and-dried FSBOs, family deals, etc. The art of brokerage takes time, every second of it uncompensated until and unless the transaction is successfully closed.
If you want to argue that real estate representation in Arizona is a sucker bet for all but a successful few, I will agree with you completely. If you want to argue that members of the Arizona Bar are tempted by that sucker bet, my experience is that you are mistaken.
I don’t think you have a case. In Arizona, residential real estate representation would seem not to be a profitable avenue for the practice of law. Your mileage may vary elsewhere.
January 5, 2007 — 8:43 pm
Brian Brady says:
Mr. Blackmon:
Greg merely highlights a few of the many services a professional Realtor provides. Attorneys are counselers first (and damn good ones). Realtors are proactive problem solvers with local market expertise.
Your illustration is unfair as it isolates one of the many services included in the negotiated fee a Realtor charges. That fee is charged “on the come”, much like a contigency fee in the legal profession.
Your analogy is akin to saying that I’d be best served to pay $800 for 4-6 hours of legal advice when facing an alleged charge of pedophilia. Would it work? Well…maybe. Shouldn’t I pay the money for representation from arraignment to ultimate dismissal?
January 5, 2007 — 8:51 pm
jf.sellsius says:
The reality is that each experienced and knowledgeable professional brings different skills to the transaction.
Agents make the deal (the most important part of the transaction) and attorneys draft the contracts that define the rights and obligations of the parties so that the transaction reaches fruition (pretty important too).
Anyone who would have the professionals assume the other’s role is not utilizing their skills efficiently. Attorneys kill more deals than breathe life into them and if you let a non-attorney draft your contingency clauses, good luck in court if things get messy. I remind you of the incident where Redfin’s Director of Marketing sent a letter of legal import which misstated the legal facts. This make hims (and Redfin)look foolish as a result. Real estate contracts are legal documents and any addendums or modifications thereto are best left to an attorney.
http://tinyurl.com/yltwfz
As far as communication is concerned, if professionals are involved, incidents like Cathleen’s Boise simultaneous closing and move should never happen. IMO, it is the obligation of the agent &/ or atorney to advise their clients of the natural course of events,and actions to take (or not take), especially if they are aware a buy/sell is involved. You can’t assume a client knows the risks.
Since Cathleen did not know there was a another closing to take place, she could not advise her client not to schedule a closing & move on the same day, as this is extremely risky on a buy/sell. An attorney who would let that happen would risk being sued if the seller suffered damages as a result of not being informed of this risk. That is a perfect illustration why having a professional is not enough. You need “experienced & knowledgeable” professionals. Rookie mistakes can be costly.
On my first closing, I notified the pay-off bank, in writing, of the closing date but failed to call to confirm the day before. The bank rep did not show because they had not calendared the correct date. Fortunately, the bank was able to send a rep, after having to reschedule for later in the day. No harm done except to my pride (which did hurt). Needless to say, that never happened again.
January 6, 2007 — 1:43 am
Greg Swann says:
Cathleen did advise her party about the risks of a contingent sale, but they ignored her advice. When they disclosed this to her, she encouraged them to reschedule the closing in Idaho — easily done with a new build. They declined. Obviously, they had to so this in the end.
As I said, an attorney would have screwed this up entirely, as your attitude here illustrates perfectly. In any case, even though an attorney would have done no better at curbing indefatigable optimism in two states, no attorney would have done all the other jobs necessary to put and keep these transactions together.
January 6, 2007 — 5:43 am
jf.sellsius says:
Greg,
>>Cathleen did advise her party about the risks of a contingent sale, but they ignored her advice.
I did not recall your post making reference to Cathleen’s communication to her client about the risks. My apologies if I missed the reference.
>>As I said, an attorney would have screwed this up entirely, as your attitude here illustrates perfectly.
How can you make that statement? How exactly would an attorney screw it up entirely? By being incompetent or inexperienced, perhaps. Experienced attorneys generally advise against simultaneous closings and take special care in those they undertake. I have done a number over the years without problem (as in Cathleen’s case). And how exactly does an attitude, of any kind, logically support your statement that an attorney would screw it up?
Perhaps “your attitude”, as reflected in your statement, prompts you to rely on “stories” to generalize a proposition about attorney competence:
>>In Arizona, attorneys almost never work on residential real estate transactions. Every attorney-involved transaction I’ve ever heard about has been a disaster — although the stories probably improve, as stories will.
My point remains. Hiring an professional is not enough. You are better off hiring an experienced and knowledgeable one. That is my attitude.
January 6, 2007 — 11:40 am
Cathleen Collins says:
Though the conversation was about my transaction, I’ve stayed out of it — Greg has represented it well. But I gotta say I was struck by the arrogance of some of the comments by non-Realtors, who believed that attorneys would have handled the situation better. I won’t expand on that here… it deserves its own post. But for now I’d like to share the testimonial that we received from my client in this transaction:
January 10, 2007 — 8:25 pm
Craig Blackmon says:
What a friendly, well-rounded blog. If you dare to question whether “everyone needs a realtor every time,” you’re accused of being whiny and arrogant, regardless of the actual content of your comment. I thought phrases like “Is a realtor the ONLY professional who can provide guidance to a home seller?” and “there are other professionals who can fill some of the roles played by an agent” would be taken at face value: Consumers have options and should consider what best suits their particular situation. Turns out the “realtornistas” tolerate no view but their own — and they rule with an iron (rhetorical) fist.
Nonetheless, one final comment: Greg notes that “The art of brokerage takes time, every second of it uncompensated until and unless the transaction is successfully closed.” So, if for some reason the client decides that closing is not in the client’s best interest, the agent will now have a personal conflict of interest with the client (after all, we all need to get paid — we’re not in this for charity (or is that just the arrogant, whiny attorney perspective?)). With an attorney, you have no such conflict of interest and you can rest assured that the attorney wants what you want.
I work for a very reasonable flat fee ($795) assisting FSBO buyer and sellers in WA. I hope attorneys in AZ realize they can make a living with this type of business model. You guys could use a little competition to take the edge off your own attitude.
And for the record, Cathleen, I have no doubt you did an excellent job for your clients in this instance — and I’d wager in every instance given your demonstrated knowledge and experience.
January 11, 2007 — 9:38 am
Greg Swann says:
Craig,
Very sorry you feel yourself to be aggrieved.
> I work for a very reasonable flat fee ($795) assisting FSBO buyer and sellers in WA.
As I said, in Arizona, the kind of transaction you might be involved in can be handled by a title company without an attorney. When you see a house in the tax records that sold for half of what it should have, this is how it was “brokered.”
On the other hand, attorneys neither list nor show, so they typically would not be involved in a Realtor-represented transaction in Arizona. If they were, this would be an added cost incurred by the person seeking legal advice — always encouraged, rarely pursued.
In this particular transaction, I believe that attorney-involvement would have killed the deal. Attorneys are territorial and confrontational, and the end-game negotiations on these homes required a lot of lattitude and a lot of conciliation — and a high degree of respect for the other parties involved. My belief is that if either of the Realtors had been male, the deal would have collapsed in blame-storming and recriminations.
Attorneys are great for breaking things. In my experience, they’re not all that good at fixing things. In any case, this is not the type of transaction an attorney typically would be involved in in Arizona.
> So, if for some reason the client decides that closing is not in the client’s best interest
Happens all the time. Some will, some won’t, so what? It’s life in sales, not just real estate sales. I do believe that real estate commissions create, de facto, an agency coupled with an interest. I also believe houly and salaried employees are lazy by lifelong habit. An incentive pay plan brings forth the zeal that gets the job done when it would be much easier to kill it. Your $795 would not have lasted very long on this transaction — but you would have been paid the same if you had aborted everything at the first hiccough. Who has a conflict of interest?
January 11, 2007 — 10:46 am
Craig Blackmon says:
That’s a good point — the conflict of interest argument can cut either way depending on the particular situation. Let me try one more time to get my point across — I’ll use an analogy that should resonate with you hounds: there are many ways to skin a cat (contrary to what the those who only skin cats for a living might say) and each consumer should consider which method best suits their particular situation.
January 11, 2007 — 11:20 am
Greg Swann says:
> I’ll use an analogy that should resonate with you hounds: there are many ways to skin a cat (contrary to what the those who only skin cats for a living might say) and each consumer should consider which method best suits their particular situation.
I agree with that completely. We tell people when they don’t need us, when what they need is beyond our ken, or when having us involved won’t do any good. At the other end of the continuum, I have done very complex, very stressful transactions for nothing. Every circumstance is unique, and Realtor representation is only a good solution for some of them.
Off topic, I am very interested in meeting someone who skins cats for a living. 😉
January 11, 2007 — 11:58 am
Craig Blackmon says:
Post: “Who needs Realtors? That’s easy. Anyone who doesn’t do this job every day.”
Previous comment: “Every circumstance is unique, and Realtor representation is only a good solution for some of them.”
Looks like you’ve changed your tune. My work here is done…
January 11, 2007 — 12:24 pm
Greg Swann says:
> Looks like you’ve changed your tune.
Ack! I have changed nothing. No one here has ever said that Realtors are necessary or even appropriate for every transaction. What I said is that attorney-assisted real estate deals are the rare exception in Arizona, and attorney involvement may turn out to be harmful in certain circumstances — like the one cited here.
January 11, 2007 — 12:33 pm
Craig Blackmon says:
Not to beat a dead horse here (while my actual work languishes), but that is EXACTLY what you said in your initial post. In YOUR words, you said “Anyone who doesn’t do this job every day [needs a Realtor],” i.e. every non-Realtor needs a realtor to sell their property. At no point IN YOUR INITIAL POST do you discuss attorney-involvement in residential transactions. C’mon, Greg, it’s OK to admit that you exaggerated a little in a post. Heck, we all do it, it’s what blogging is all about. But when someone calls you on it, have the integrity to admit that you overreached.
January 11, 2007 — 12:45 pm
Greg Swann says:
Indeed: I did not explore every conceiveable circumstance in a 350 word column written for a daily newspaper. But I never would discuss attorney-involved residential real estate transactions in Arizona, since there are so few as to be negligible. Nevertheless, virtually everything I have written on real estate is available here, including discussions of circumstances where we referred clients out, worked for free, etc. I see this as Straw Man abuse. The last word is yours if you want it.
January 11, 2007 — 12:53 pm
jf.sellsius says:
For some reason my comment of January 6 is still in moderation. Is there a problem?
Here it is again:
Greg,
>>Cathleen did advise her party about the risks of a contingent sale, but they ignored her advice.
I did not recall your post making reference to Cathleen’s communication to her client about the risks. My apologies if I missed the reference.
>>As I said, an attorney would have screwed this up entirely, as your attitude here illustrates perfectly.
How can you make that statement? How exactly would an attorney screw it up entirely? By being incompetent or inexperienced, perhaps. Experienced attorneys generally advise against simultaneous closings and take special care in those they undertake. I have done a number over the years without problem (as in Cathleen’s case). And how exactly does an attitude, of any kind, logically support your statement that an attorney would screw it up?
Perhaps “your attitude”, as reflected in your statement, prompts you to rely on “stories” to generalize a proposition about attorney competence:
>>In Arizona, attorneys almost never work on residential real estate transactions. Every attorney-involved transaction I’ve ever heard about has been a disaster — although the stories probably improve, as stories will.
My point remains. Hiring an professional is not enough. You are better off hiring an experienced and knowledgeable one. That is my attitude.
Addendum: I did not suggest Cathleen did anything wrong. In fact, despite her advice, it could have been a disaster. In NY, attorneys do a lot of the work done by realtors in jurisdictions that don’t customarily use lawyers. Scheduling is one of them. Whether it was Cathleen or an attorney doing the scheduling (or trying to fix an already screwed up one), it makes no logical sense to say the attorney would screw it up. Don’t you agree?
But more to the point of this post. The post implied that communication is a reason to use a professional. Yet the post shows the opposite effect, to wit, even if you use a professional, things still can go awry. In this case, professionals were at every turn yet still the seller scheduled 2 events on 1 day and almost blew up the deal. The presence of professionals did nothing to prevent this. An attorney wasn’t even involved.
Do you make intellectual room for the possibility that an attorney might have prevented the scheduling gaff?
Since you have such little experience with attorney deals in Arizona, I agree with Craig that you overreached in assuming the (in)competency of attorneys in a real estate transaction. To say “an attorney would have screwed this up entirely” seems a tad harsh. Maybe it’s just me.
January 13, 2007 — 11:40 am