Perils of Real Estate Practice, Part 3

Continuing with my "ideal" real estate matter, the one we never EVER see, here's more reality:

1. A closing is scheduled with just a few calls, in a convenient location. In reality, the scheduling takes many many calls, and even if you "delegate" this to a secretary or paralegal, it takes a lot of THEIR time. If you regularly makes these calls yourself, I challenge you to show me how flat fee real estate is remotely profitable. A tip to save real aggravation.....if you know what is realistic as far as when the closing can happen, assert yourself. Do NOT go with the clients or the brokers aggressively early date. When you do this, invariably you will make the calls, and then get to the last call, and a key player can't do it. As far as convenient locations, other than your own office, all other locations are inconvenient, its only a matter of degree. It's YOUR time, remember that.

2. The closing takes place on time and takes an hour. Uhhh, someone is usually late. When I feel really cynical, I try to arrive LAST, so at least less of MY time gets wasted. I have had a few closings take less than an hour, but I've had many more that took 2-3 hours. That would be ok, if I were on an hourly, but, well...you get the point.

3. The closing is done, and there are no post-closing escrow issues. Was it Shakespeare who said "Nature abhors an escrow"? OK, HE didn't say it, but if a post-closing escrow exists, and we're not getting paid extra to deal with it, WE lose. Of course, many times the only way to resolve a problem at closing is to hold an escrow, so at least you can close. I always try to convince everyone at the closing to "adjust" rather than escrow. The attorneys always understand why, and the clients don't, until you mention the extra attorneys fees....then suddenly they can adjust the problem. (Incidentally, this is tomorrows topic....how attorneys fees affect case settlement) You might think, if proper pre-closing prep is done, all issues should be known and resolved, but WHO CAN DO THIS FOR THESE FEES???? So you show up at the closing, get it done, and hold an escrow (for some taxes, or possession, or a judgment, or a lien, or for any number of things). The times when I have charged for a post-closing escrow issue, I felt distinct resentment from the client. Of course, the times I didn't charge, I felt distinct resentment myself. I finally concluded that I have enough resentment, so this is one I try hard to avoid.

4. You send a closing statement; the client appreciates everything you did.....and refers you all kinds of business over the years. I always leave a closing with my closing statement checked and re-checked so all the math is right, and I can send out a clear statement. Its worth the extra time at the closing to be sure. Getting back and having the numbers not work is frustrating, time consuming, and non-compensable. So, be thorough, EARN your money, and don't spend that $950 in one place.
As far as client appreciation, I've gotten some nice, heartfelt thank-yous over the years, and they are always appreciated. I've also had many occassions where I had run through brick walls for the client, and KNEW they had no idea how hard I worked, or they knew and took it for granted.
Lastly, if you are a generalist, and you do real estate to "increase your client base", and hope to be that clients "family lawyer" and get ALL their business, including the juicy negligence cases you find most profitable....BEWARE. Unless you take steps to educate your clients, they will view you as a "real estate lawyer" and refer their "real cases" elsewhere. I once had some difficult clients who I had represented when they bought their house. Six years later when they were selling, we conducted all our business by phone and mail up until the closing. At the closing the wife was in a wheelchair, the result of a pedestrian/auto accident, which was my first knowledge of this. The husband proudly told me about the big settlement, and the big fee their lawyer had made "without doing hardly anything". I told the wife I hoped she was feeling better, and was thankful for the opportunity to work my ass off for a small fee, and my future "opportunities"

and so, I shall rant no more.....

Perils of Real Estate Practice, Part 2

Yesterday I outlined a simple, albeit fictional, deal, and promised to compare it to reality. Here goes:

1. You meet the client and establish a "relationship". Sometimes you start out just on the phone, and you either connect or you don't. Sometimes you have an initial meeting and you realize this client should not be buying a house, but how do you convince them of it? Sometimes you just get a bad feeling. Sometimes the initial meeting takes way longer than you thought, and you know that every aspect of the deal is going to be like that.....and that's always a profit killer when you are on a flat fee.

2. You advise them "pre-contract" so they understand the process, and if the first deal doesn't go through maybe you get paid something for your time......and for a lot of reasons, maybe you don't.

3. You get initial details on a solid deal from an honest real estate broker. Pardon my oxymorons, but in general I have come across real estate brokers who are "hard-working", "tenacious", and even "enthusiastic", but then I run out of complimentary adjectives. One thing they do a lot is CALL you, and they want one thing.....to find out when the closing is. I have had brokers who actually told my client, and the other party, when the closing was, even though we attorneys had not scheduled it yet. I guess the way they saw it, they took a shot. You can't make these things up.

4. You represent the client on the contract (which of course goes smoothly and is all done via the mail). Uhhhh, usually it goes back and forth and back and forth and takes WAY longer than it should, and engenders numerous calls to and from EVERYBODY. When brokers offer to pick up and deliver the contracts, I usually let them, let em WORK.

5. The client gets timely financing without a hitch. OK, sometimes this happens, but only because some banks are so careless they'd give a loan to a ham sandwich. Of course, when your client has trouble getting financing, everybody's stress gauges go up, and you realize your client should have gone to one of those ham sandwich banks, and everyone is blaming you for not sending him there. Any lawyer who has ever been in one of these mortgage problem deals, knows all the extra work thats coming (for no extra fees and tons of pressure)......and all the questions from the client.......is my down payment at risk? can we kill the deal? can I get an extension? can I re-apply? when is the closing? who put that mustard all over my back?

6. You review the title report and it is clean. Maybe one out of ten you don't have an issue. The rest of the time, somebody from your office who knows what they are talking about (YOU?) has to make some calls or draw some affadavits to solve a problem. Extra fees? NO, its included.

I have a few more, but I will deal with them on Wednesday, in Part 3.

Tomorrow is my 50th birthday, so I will post some random thoughts on that......for a goof....

Perils of Real Estate Practice, Part 1

After 24 years, I recently decided to stop taking new real estate matters. These are what many general practitioners would call the "bread and butter" of a general practice. I am talking about basic representation for the buyer or seller of a residence. In New York, this is generally a house or a co-op apartment. I know that real estate practices differ from state to state, but I'm sure many of the business issues are the same. I also know that while I can, and will, list a litany of real estate perils, many of them have solutions. I will even try to offer some, I just won't being doing them any more.

Let's define a few "givens" in the market:

1. Clients expect to be quoted a fixed fee, for handling the matter from start to finish. I know there are attorneys who charge hourly for real estate closings, my hat is off and I bow as I say it, but generally market forces have made this a flat fee affair.

2. It is a huge responsibility for the attorney. There is a lot of money at stake, and there are often multiple deals hinging on each other. And Lord knows, we all need more pressure in our lives.

3. A real estate matter is very "client intensive". For the client this is often the biggest transaction of their life, and THEY are under pressure. This is something they love to share.

4. There are no simple deals. Think about this....here's the outline of a simple deal, where all goes well.....You meet the client and establish a "relationship"; you advise them "pre-contract" so they understand the process; you get details on a solid deal from an honest real estate broker; you represent the client on the contract (which of course goes smoothly and is all done via the mail); the client gets timely financing without a hitch; you review the title report and it is clean; a closing is scheduled with just a few calls, in a convenient location; the closing takes place on time and takes an hour; there are no post-closing escrow issues; you send a closing statement; the client appreciates everything you did.....and refers you all kinds of business over the years.............If this EVER, EVER happens, I'd say the $950 or $1250 or $1500 you received was MAYBE worth the time, but......
I have done hundreds of closings and I have NEVER, EVER had a transaction go that way. Tomorrow I will review some aspects of the usual deal, and then we can re-visit what the proper payment for such fun should be.

5. Not only are the deals client intensive, the deals rely on multiple parties performing their role correctly. On a New York co-op sale, as sellers attorney I rely on the following parties knowing their stuff and acting professionally: the buyers attorney, the buyers mortgage broker, the buyers lender, the co-op board, the co-op managing agent, the lenders attorney, the lien search company, the attorney for the mortgage payoff bank, and the brokers. Thats a lot of people "getting it right", and the consequences of any of them being a bozo are significant. Additionally, if the buyer or seller flakes out at some point (something that always seems to happen when the rest of the players are top caliber), you end up working your tail off.

I knew I might rant a bit when I started this, thats why I called it Part 1. Part 2 tomorrow....