Clients often fail to understand what REALTORS actually do for them. Now whose fault is that? I would say it’s the REALTOR industry’s fault for not clearly explaining their value proposition. Some time ago, I wrote Value Proposition for a Residential REALTOR (http://www.eqjournal.org/?p=73) and Value Proposition of a Commercial REALTOR (http://www.eqjournal.org/?p=255) but a recent incident inspired me to write this.
Of all the professionals involved in a typical residential or commercial real estate transaction (lawyer, surveyor, appraiser, home or building inspector, contractor, REALTOR, bank, other lender, mortgage broker, engineering/environmental/soils consultants, planners, lobbyists, title insurance, mortgage insurance, building and property insurance…), they all get paid by the hour except REALTORs (and possibly mortgage brokers) who only get paid (usually) on successful completion of an Agreement of Purchase and Sale. This might explain why so many lawyers are of the deal breaking kind instead of the deal making type—the more issues they can find, the more hours they can bill. But it doesn’t explain why they tend to do nothing unless asked to by their clients. They sit and wait for “instructions”.
REALTORs can’t afford to do that.
Here are a few (edited) email exchanges (names and numbers have been changed to protect client privacy) where you can see the level of detail and broad range of issues that can come up in (and after) a real estate closing. We are dealing here first with a land purchase and second financing for a project to be built on a just acquired site.
Email 1 (dealing with cost sharing for an access road amongst three adjacent landowners):
Bill, Mike and James are lawyers representing each of the three landowners. Dr Smith, Mr Reynolds and Mr Barclay are the three landowners.
Bill/Mike/James, I spoke with Dr Smith, Mr Reynolds and Mr Barclay this morning. I believe we have an agreement as follows on the cost sharing for the access road:
1. Mr Barclay will upfront the costs of building the access road up to and including granular A. This will provide access not only for Mr Barclay’s property but Mr Reynolds’ as well. Mr Barclay will confirm this with Peter Williams, Mr Reynolds’ engineer.
2. He will not ask Mr Reynolds to contribute to that cost other than to cover his own design and engineering costs for connecting to the access road.
3. As a result, Mr Reynolds will not have to participate in the road cost sharing agreement.
4. Dr Smith has given Mr Barclay his word that when the title issue on the back 40 acres is cleared up, he will authorize a cost sharing agreement to be registered on title. Mr Barclay is satisfied with that.
5. That agreement will be only between Mr Barclay’s property and the back 40 acres with Mr Barclay absorbing/taking responsibility for Mr Reynolds’ acreage.
6. This removes the last obstacle from completing the APS between Dr Smith and Mr Reynolds other than perfecting the lot line adjustment which Mike will take care of.
7. Completion date between Mr Reynolds and Dr Smith will be either before the Xmas break or in the first 2 weeks of January 2014.
Best regards to all,
Email 2 (dealing with construction financing Mr Barclay is trying to draw down/he requires some consideration from the Seller, Dr Smith):
Bill/James, Mr Barclay and Dr Smith also talked about the financing that Mr Barclay needs to get his project unblocked.
Here’s what was agreed:
1. Dr Smith (subject to his partners agreeing) will postpone his entire Seller Take Back Mortgage to the ~$500k in interim construction financing that is now on the table for Mr Barclay.
2. Mr Barclay will, in addition to other security, offer his personal guarantee.
3. Mr Barclay will perfect the severance of the 12-acre parcel and pay down Dr Smith’s STB mortgage in the amount of $225,000 on the earlier of 1st advance from another construction loan or July 31, 2014.
4. The balance of the STB mortgage (around $475,000) will at the same time be returned to first position on the balance of the lands (around 29.4 acres).
Email 3 (getting permission from Mr Reynolds for Mr Barclay to talk to his engineer, Peter Williams):
Mr Williams, pls meet Mr Barclay and vice versa. Mr Barclay owns the property next to Mr Reynolds. He has given his permission for Mr Barclay to speak to you about his new bldg. Mr Barclay wld like to drop in and see u.
Mr Reynolds, can u pls confirm that it is OK for Mr Barclay and Peter to talk and for Peter to show him your site plan etc?
Best to all,
There are a 1,001 details that come up not just during negotiation and due diligence but in closing every transaction and doing every financing. It turns out, other than clients and sometimes even then, it’s REALTORS who actually get deals agreed to, amended and completed.
Bruce M Firestone, broker, Century 21 Explorer Realty Inc
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