One of the co-author’s favorite movies is the Wizard of Oz and his favorite scene in the movie is when the characters arrive at the Emerald City and are ushered in for an audience with the Wizard. The Wizard is this big scary head suspended in mid-air, surrounded by geysers of smoke and a thunderous voice . Toto the dog goes over and very skillfully tugs and pulls open the curtain, exposing a little man who’s frantically manipulating a machine that’s created the scary image. Next, the Wizard, trying to make excuses for the little man says the classic line, “…ignore the man behind the curtain.” That’s a great scene, but what does this story have to do with real estate? Actually, everything.
You see, for many years, and to this very day, the real estate industry has been cloaked in secrecy and has operated behind a kind of mysterious curtain. For many consumers, buying or selling a home has been an intimidating and formidable process that challenges the best of them. We’veworked with highly trained and skilled professionals who don’t understand what’s involved with buying and selling a home. Everyone is so busy these days and most buyers and sellers don’t have the time to learn the in’s and out’s of a real estate deal and others don’t care to take the time to learn. Many times you’ll hear the question, “What in the world are agents doing to earn their 6 to 7% of the purchase price?” because consumers are totally in the dark about what we do.
In years gone by, agents controlled the data on properties for sale and they did everything they could to keep that data to themselves. As we all know, that's changed. The public now has access to most listed properties through the Internet on web sites like: mlslistings.com, Realtor.com, GoogleBase, Yahoo Real Estate, AOL Real Estate, Zillow, etc. Consumers are just beginning to question what they’re getting for their money when they hire an agent and since our real estate markets have changed so dramatically in most areas of the country, now might be just the time to try to “clean up” the service side of the industry.
This book is an attempt to take you behind the curtain of the residential real estate industry to find out how it really works and help you find the right real estate agent to assist you and possibly save you thousands of dollars in costly mistakes. Buying and selling homes doesn’t have to be a scary undertaking and we’re going to help you understand that the real problem isn't the property you buy or sell, but rather your agent’s lack of knowledge and standard of care in helping you buy or sell that property. Take the lady who bought a beautifully remodeled house only to find out after closing, she had approximately $75,000 in property defects that were not disclosed by the seller. As it turns out, all the remodeling was done by her son-in-law, who was not a licensed contractor. And he didn't get building permits, which the seller conveniently failed to disclose. The remodeling is a red flag and the risks should have been pointed out to her by her buyer’s agent. The agent should have taken her by the hand and the two of them should have done more investigating before moving forward on the home. That, in fact, was not the case.
After reading some of the horror stories in this book, we know that a burning question you might have would be- do I really need an agent? In most cases, we think the answer is- absolutely yes. The vast majority of real estate transactions are far more complex than most buyers and sellers realize. Professional real estate agents are in the field every day and they understand the intricacies of a real estate deal. The good ones know how to navigate the complex and sophisticated issues of a real estate transaction and they do most of their work seamlessly in the background. We’ve found that most buyers and sellers don’t know what they don’t know and without an agent to guide them through the mine field of buying and selling, they’re inviting major problems for themselves. The trick is to find the right agent to help you navigate your way through the process and educate you at the same time.
We’d like to clarify that this book is not designed to be a slam on real estate agents. Not in any way. We’re agents and we’re very proud of what we do for a living. In fact, our hope is that many agents will buy the book and learn these risk management techniques to keep their clients out of trouble (and themselves). Together we have about 40 years of experience. During that time our primary focus has been to be good fiduciaries to our clients and to educate them so that they have a much better grasp on what to expect when buying and selling. We also believe that buyers and sellers need to have a firm understanding of their responsibilities to protect themselves. The sooner we can educate consumers on what’s a competent agent and what isn’t- the sooner we’ll be able to rid our industry of agents who don’t belong in the field. And, you the consumer will benefit from that. One couple who could have benefitted from hiring a competent agent had saved most of their lives with the intention of buying an income property. They were excited when they found the perfect affordable duplex. It wasn’t long after closing the deal that a neighbor to the duplex filed a complaint with the city. It turns out that they purchased a single-family home that had been illegally converted to a duplex. The city required the new owners to kick the tenants out and remove all the improvements that converted it to a duplex. They are stuck with an overpriced house, loss of rents and lots of money spent on repair costs. Think they were happy with the agent that helped them with that purchase?
Make no mistake. There are many, many talented and competent agents who deserve respect for the true professionals that they are. They’ve been able to reduce the growing number of lawsuits that result from inadequate and irresponsible representation. They work very hard and they’re very good at what they do. And then again, there are many agents who floated in to the business and don’t have a clue about what they’re doing. They have no idea of how truly dangerous they are and the mine fields that lay ahead for them and their clients. And then there are the agents who just don’t care. They’re working in the field just as long as they’re making money, but they haven’t devoted themselves to growing and learning on a continual basis to be the best possible fiduciary to their clients. They’re in it only for themselves and that also means trouble for you, their client.
As we mentioned earlier, there’s still a cloak of mystery around what agents do and most buyers and sellers are clueless about what they should expect from their agent and how to go about finding a good one. The problem is that no one told the public that the average agent is not as well-trained as they should be. Because of this, most buyers and sellers assume that it doesn’t matter what agent they choose. They choose their agent because they met him/her at an open house, called an listing agent in an ad, etc. Even worse yet, some buyers and sellers will hire the same lousy agent that they used in a prior transaction just because that’s the only agent they know!
Another reason why we wrote this book is because we’re a little angry at our industry. If you ask the average consumer what they think of most agents, you most likely won’t hear a positive response. As industry professionals we understand why consumers have a low opinion of real estate agents. We personally hate to see buyers and sellers who get ripped off by the poorly trained or unscrupulous agents in our business. We also are a bit frustrated that our own clients, who receive a level of service above what most buyers and sellers do, have no idea that we always go the extra mile and always keep their interests before our own. We’ve worked and studied hard over the years to be the best fiduciaries that we can be for our clients, but our clients simply believe that all agents work at this level. Not so.
We know that this book may make some agents angry, but we also feel that it was time for insiders in the industry to educate the public on how to choose a good agent. Most real estate web sites will provide you with a simple list of questions to ask a prospective agent. We don’t think that’s nearly enough and we’re going to show you what to look for and what to run (not walk) away from if you spot it in your agent. We’re also confident that the good agents in the business won’t be intimidated or angry in the least after reading this book. We’re confident that they agree with us that it’s time to raise the public’s opinion of the hard working, dedicated real estate professionals that we are.
One young couple who most likely doesn’t have a high opinion of agents, bought a beautiful townhome in a community homeowners association with the assistance of their buyer’s agent. As is required by law, the seller provided disclosure information about the financial status of the association. Unfortunately, their agent didn't review the association documents and the Buyer didn't realize that not only were some important documents missing, but the documents were for the prior year. The result was that the buyers didn't know that the complex was involved in litigation due to several building defects. Immediately after the buyers moved in, they received an assessment from the association for $10,000 plus a monthly dues increase for legal fees of $100 a month. Think this kind of thing doesn’t happen?
This is just a small sampling of some of the horror stories that you're going to read about in this book. But I'm sure you're saying, “Couldn't these poor souls just sue somebody to recover these damages?” The answer is yes, but it’s not that simple. Litigation is not a pretty process. And it doesn't work like it does on Boston Legal. Justice isn't swift nor is it necessarily fair. And we all know how exorbitant the costs are. Sometimes, even though a plaintiff has a strong case, he or she won’t pursue it because
A typical case might cost $50,000 to $100,000 in legal fees on each side. The result is that only about 5% of cases actually go to trial. That’s because clients usually settle since their legal fees have begun to skyrocket. And, in most states, the purchase contract requires arbitration but also includes an attorney fee clause which states that the loser has to reimburse the winning party their attorney fees, as well as their own attorney. You can see this a very financially dangerous game we play, when we say, “...I’ll sue that guy.”
Our main goal of this book, is give to you a reliable roadmap to find and work with good agents. We’re in the field on a daily basis and work with many of them. Most agents are at best, average. If you’re familiar with the 80/20 rule, then you’ll see how it applies perfectly in this situation. Think back to when you were in school, to get an A or a B, you had been in the top 20% your class scoring 80% or more. So, if we assume that 20% of real estate agents are above average, then that means that 80% are average or below. Not a pretty picture if you’re working with one of those average or below average agents and he or she ends up costing you thousands of dollars. We want to show you how to find an agent in the top 20%.
We’re convinced that if you were to read and apply the techniques and recommendations in this book you’ll be able to dramatically limit your exposure while working with a real estate agent and possibly even avoid ever having to talk to an attorney. We want you to avoid the pain of experiencing a real estate transaction gone bad and the ensuing stress, both psychologically and emotionally, and the financially crushing burden that comes with that transaction.
So, are you ready to roll the dice on choosing your next real estate agent or would you like us to show you how not to gamble on choosing the right representative and fiduciary in the purchase or sale of the single largest investment in your life?