By Bill Johnston
In the first two parts of this series, (Part 1 here and Part 2 here), we noted that the real estate professional’s success hinges on building long-term, mutually beneficial relationships with clients, colleagues and sub-trades. Let’s take a look at how we deal with our suppliers.
We need a wide array of products to do our job today. Cell phones, computers, Blackberries, advertising materials, signs – the list goes on and on. As businesspeople, we need to exercise care in negotiating the best deal we can for only those suppliers we need to do the job properly.
When I got my first car phone in 1988 (only $3,800!), the salesperson sold me a package that included a message-taking function. About three months after I got the thing, a client asked me why I hadn’t returned his call from a few weeks ago. I told him that I hadn’t received any message. He pointed out that he had left it on my “answering machine”. The penny dropped, and I learned how to retrieve messages. I found quite a few that I had inadvertently ignored. If you do dive into a new technology, take the time to learn how to use it.
We also need to ensure that the suppliers we choose have a well-established reputation for quality and service. A lifetime guarantee is not much good if the guarantor is now living in Timbuktu.
Lawyers: Whether we like it or not, lawyers are a part of our business lives. I happen to be a lawyer as well as a real estate broker, and I see friction arising between the two professions when members stray outside of the limits of their own expertise. For example, lawyers sometimes try to give business advice to their clients, or to real estate agents. Lawyers are not business people! They are professionals with an important skill set that does not include professional marketing or property valuation.
Lawyers are trained to think about the one situation in a thousand that goes wrong, while we are trained to think about the 999 that go right. In my trading area, when asked, a lawyer will often advise a seller not to complete a Seller Property Disclosure Statement, for fear that the seller may get some of the information wrong, suffer some liability for the inaccuracy, and then blame the lawyer for advising him to complete the form. Do not ask a lawyer for advice on such issues. He or she is not qualified to answer a business question. Regarding the SPDS, the correct question to ask is, “What can go wrong if we use it?” The obvious answer, for which you don’t need a lawyer, is that if you get some information wrong, there may be negative repercussions, so get it right!
When necessary, refer your clients to lawyers for legal advice. Do not stray outside the limits of your expertise to try to deal with issues for which you are not trained. When necessary, make the deal conditional upon the lawyer’s examination and approval of its terms from a legal perspective.
If we stay within the above guidelines, lawyers and real estate professionals can evolve long-term win-win relationships that maximize the benefits of their respective areas of expertise for their mutual clients.
Accountants: Accounting and tax advice may be required by your clients on occasion. Unless you have special expertise in these areas, refer the client to a qualified professional. Our job is to ensure that the client gets the best advice on every key issue. Sometimes, that will require us to recommend a clause in an offer making the deal conditional upon the client getting advice on tax issues or other financial matters.
Accountants can also be useful in structuring a deal to maximize the financial benefits for the clients. This expertise can be very useful in many commercial transactions and in situations where estate planning is an issue.
Property inspectors: In most instances, it is wise to recommend a property inspection condition to your buyer. Buyers are required to protect themselves (caveat emptor – buyer beware) by doing “reasonable” inspections before they buy anything. Because professional inspections have become common in most trading areas in Canada and the U.S. during the past 20 years, our courts would expect a prudent buyer to have one done prior to committing to a firm purchase agreement.
In a hot market when good properties are attracting multiple offers, your buyer may have to forego the property inspection condition. If you have warned your buyer of the risk, and your buyer is prepared to assume the risk, you should proceed.
On occasion, your buyer may have the opportunity to have a professional inspection done prior to the multiple offer presentation. If there is sufficient time, you should recommend this step to your buyer. Why not spend a few hundred dollars on the report to ensure that the property is sound before offering hundreds of thousands or more to the seller? We have had instances in our trading area where two or three inspections will be going on at the same time on behalf of bidders in a multiple offer situation, who want to make a firm offer, but want the comfort of their own inspection report before competing at the offer table. Sellers should be encouraged to permit these pre-offer-presentation inspections. Prospective buyers who have already invested a few hundred dollars will compete even harder to become the successful bidder.
It is not uncommon, particularly in larger urban centres, for listing salespeople to include a professional inspection report in the marketing package. I do this for most listings, and I hire one of the best and best-known inspection firms in my trading area to do the report. By doing so, I get a good report that has credibility with buyers and their representatives. Despite the fact that the buyer does not obtain the report directly from the inspection firm and cannot sue the inspector based on a contract if the report is flawed, the buyer can still sue the inspector in a branch of the civil law called “tort” if the buyer can prove that the inspector was negligent and the buyer suffered quantifiable harm as a result of relying on the report.
Your client may look to you to recommend a property inspector. In such circumstances, I recommend the inspector that I would use if I were the buyer, and give my client a couple of other names of reliable inspectors, just in case my top choice isn’t available. If you were to ask a lawyer about recommending inspectors or other service providers, he or she would either advise against it, or would suggest giving your client several names. Once again this illustrates the mistake of asking a lawyer a business question. The lawyer will almost always give you the overly cautious lawyer answer. If I have great confidence in one inspection firm, it will be the one I recommend first.
By the way, I never take referral fees from any of the service providers that I recommend to clients. I am in this business to earn the substantial commissions as general contractor. I do not want a few nickels from the sub-trades; they earn their money by providing my clients with excellent service.
Next time in the final installment of this series, we’ll look at relationships with other suppliers, our staff, and our families.
Bill Johnston obtained his M.A. in psychology from the University of British Columbia in 1976, graduated from Osgoode Hall Law School in 1980, and was called to the Ontario Bar in 1982. He entered the real estate brokerage business in 1982. He has won many sales awards and has served several terms on the Board of Directors at the Toronto Real Estate Board. He is a broker at Royal LePage Your Community Realty in Thornhill, Ont. Email [email protected]
