I took a month vacation from posting - busy with work but also thinking a lot about what I wanted to write about next. I've been thinking a lot about this story and how to share it, because it comes from my personal experience. It is ordinary in the sense that things like it happen every day in every market in the U.S. It is extraordinary because stories like it are so rarely told, even by real estate brokers.

I'll tell you the tale in this post, and then I'd like to spend the next couple posts identifying principles I think this story illustrates and teaches. Throughout, I welcome your comments.

A rental for the parentals

In winter 2006-07, my sister, my partner, and I decided to persuade my parents to move closer to Minneapolis, where the rest of us live. They are elderly and in questionable health, so we wanted them closer to be able to spend more time with them and to look out for them. They agreed, in fact, but balked at the much higher price of housing here than their little town two hours away.

We hatched a scheme: my partner and I agreed to buy a house and rent it to the parents at a very favorable rate, provided my sister would help them find the home they wanted. (My sister is not a real estate agent - she's just the care-taker type.) Mom, dad, and sister started looking in the corner of the Minneapolis-St. Paul metro area closest to my sister's home. My mom does not drive, and was looking forward to my sister being able to chauffeur (or is that chauffeuse?) her around. My sister was hoping that Mom would look after her dog while she was at work some days - my mom really likes dogs. It seemed like a good deal.

The three of them made showing appointments with the listing agents of several listings in the area. The parents got really excited about one of them: a nice one-level twin-home, no steps (my dad is a little mobility-challenged), big living area, two-car garage (one for their car, one for accumulated "treasures"), and separate bed- and bathrooms. (One of my parents snores so intensely that the other chooses not to sleep in the same room - I'm not naming any names.) The property lay in a development of twenty-some units about half completed and maybe one-third sold, in a small suburban community, we'll call it Smallville. (All the names in this story have been changed to protect . . . well, actually just because that's what everyone seems to do). Mom, dad, and sister all thought this was the one.

My partner and I arranged to see the unit; we explained to the listing salesperson that we were representing ourselves. We thought it looked pretty good, too, and the list price of $205,000 was within our target budget.

We wanted to figure out how much to offer. I did not use Zillow.com (though I now regret not having checked it out just for fun). Instead, I figured I'd ask a real estate professional what it was worth.

Fifteen minutes with Salesman Steve

The local REALTOR^® association CEO in that part of town is a former real estate salesperson. I called him and asked if he knew of a broker or salesperson with a lot of experience in Smallville. He gave me the name and phone number of Salesman Steve. I called Steve's number and left a message. He called back within a half hour.

"Steve," I said, "I'm not really looking for a broker to represent me. I just want to pay you to do a valuation and advise me what to offer for this property. What would you charge me for that?"

"Well, let's just talk for a bit first. What is the address?" he asked. I told him.

"Yeah, I know that unit." In the next 15 minutes, here is what he told me.

• He had inspected the unit once.
• The developer was Smallville's Housing Redevelopment Authority (HRA).
• The property had previously been a light industrial site, but it had not required any hazardous substance cleanup before redevelopment.
• He described the finishes (floors, countertops, etc.) accurately.
• He noted that the units being constructed were slated to have finer finishes, so we should disregard the listing broker's claims that the unit prices were going up.
• He said the list price was below construction cost.
• He said the HRA was under pressure to move units because the development was not selling as quickly as anticipated, and budgets were getting busted.

"I'm pretty sure if you offer $190 thousand and say you want to close within 30 days, they'll jump on it."

"Thanks, Steve, I said. "What do I owe you?"

"Don't worry about it," he said.

"I would really like to pay you for your time," I said. (I'm in a business where the last thing I want is people asking me for free advice on the phone.)

"I'll catch you on your next transaction," he said.

Offer, acceptance, and consideration

I got off the phone with Steve. I called the listing agent, let's call him Dual Dave, and said I was writing up an offer. I told him I'd send him a draft, but that I'd welcome his suggestions for changes before we finalized it and presented it to the seller. I sent the contract to Dave on a 2006 standard Minnesota Association of REALTORS^® contract form, with an offer of $190,000 and a proposed closing four weeks later. Dave called back, discussed a couple of changes he proposed that I agreed were good, and offered to re-write the purchase agreement on the 2007 version of the MAR form. (I teach a class on the forms, so I knew the 2007 form was fine - the only reason I used the 2006 form is that I had a pad of them lying around . . . Sound like a real estate broker now, don't I?)

Dave emailed me the purchase agreement as he had drawn it up. Interestingly, he also sent along a buyer representation agreement with the dual agency option checked. My partner and I signed the purchase agreement and emailed it back to Dave. (We crossed out the representation agreement and sent him that too.)

The seller accepted our offer; less than a month later, we closed; and the parents have been living in the new home for about six months now. (What it's like to be landlords to your parents is fodder for a whole other series of posts.)

The day I faxed the original offer to Dave, I dropped a check for $250 in the mail to Salesman Steve. On the one hand, it seemed like a pathetically small amount for the value he had delivered. On the other hand, for a fifteen minute phone call, that works out to $1,000 per hour, more than three times what I charge for my services. He called and left me a voicemail saying "thank you," sounding surprised and delighted.

The call for comments

I think this story illustrates a number of important principles and teaches some useful lessons about the real estate business. I want to talk about some of them in my next few posts, but I'm hoping some of you will comment here first.

(Feel free to slam me for representing myself - a real estate broker clobbered me on that point at a state REALTOR^® convention where I presented and told this story. "Shame on you," she said.)

-Brian