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Phillip C. Querin
Partner - Portland, Oregon Office
philquerin@dwt.com
(503) 241-2300
Win-Win-Win Real Estate Transactions
[November 2004]
Introduction. The best
real estate transactions are those in which everyone wins –
the sellers, buyers, and their Realtors®. But winning
for the agent is not just in getting paid. That’s only the
short-term goal. Winning really means turning an existing customer
into a long-term client who will return with more business in the
future and will refer others to you. The results are exponential:
The new clients become satisfied customers, then referral sources,
and so on.
However, win-win-win transactions, are not necessarily problem
free. To a degree, your ability to professionally deal with and
resolve difficulties in a transaction can actually become a benefit,
since it underscores your competence to the client and adds value
to your service. Being proactive - i.e. identifying issues before
they become major problems, is what enables Realtors® to successfully
complete a sale for the seller and buyer, and generate
future business for themselves - a “win-win-win transaction.”
What follows are some tips in helping make for smoother transactions,
and ideas on proactively dealing with potential difficulties.
1. Common Goals. Lawyers are taught to
“zealously represent” their clients. But sometimes,
it can get out of control. When this happens, i.e. when the lawyers
are at each other’s throats, it can impact the outcome of
the entire case. The clients become infected with the same level
of adversity as their counsel. Resolution becomes impossible, because
the desire to gain an advantage overshadows the desire to obtain
a solution. Good legal representation requires that the attorneys
remain focused and objective. They should avoid becoming the alter
egos of their clients.
Realtors®, like lawyers, can become too adversarial. However,
contrary to litigation, which is often a zero-sum game, real estate
transactions are entered into because both sides are striving
for the same goal – i.e. a successful closing of the transaction.
Realtors® must not let “zealous representation”
become “adverse representation.” For example, when making
an offer, it is important to remain professional and respectful
of the other agent and their client. Low-ball offers can have a
negative impact on the seller, since they suggest that the buyer
is not serious. Similarly, “take it or leave it” offers
and counteroffers can be counterproductive, resulting in an outright
rejection rather than constructive negotiation. While the offer-counteroffer
process should always leave some room for negotiation, it is important
that each Realtor® properly convey a spirit of cooperation to
the other side, rather than a flippant or aggressive attitude. Remember,
you put a face on the transaction.
Realtors® must gain a measure of control over clients who are
overly aggressive or have a “win-at-all-cost” attitude.
While your client is undoubtedly the principal and the one to whom
the duties of obedience and loyalty are owned, you are the expert.
For example, if you know from years of experience that the seller’s
opinion of the value of the home is unrealistic, and would condemn
the property to languish on the market, it is your duty to educate
the client about the reality of the situation. Develop a game-plan
for marketing the home, with pre-agreed price adjustments if it
does not sell. Discuss an acceptable, but realistic price range
for anticipated offers. If there are foreseeable problems that might
be encountered, educate the client on alternative scenarios for
how the transaction might unfold. Not doing so, and allowing the
seller to retain unrealistic expectations and dictate unrealistic
goals, sets everyone up for failure, and ultimately a disappointed
client. In short, communicate.
The greater your experience, the greater your responsibility. This
is even more true if you hold positions of authority within your
company or association. For example, if an offer is presented by
a less experienced agent, you have two distinct choices: (a) You
can use the opportunity to professionally guide the transaction
toward a smooth closing, remaining respectful of the other agent,
and by example, letting your experience quietly speak for itself;
or (b) you can seek to gain advantage over the other side by aggressive
and heavy-handed tactics which – while reminding the other
agent who is dominant – will do little to gain the cooperation
you need to successfully close the transaction. If you have burned
your bridges in a transaction, even if it closes, you may find that
the other agent will long remember it, will tell others, and you
will lose in the long run.1
2. Walking Over Dollars to Pick Up Pennies.
Part of the education process that smart Realtors® must go through
with their clients is to encourage them not to walk over dollars
to pick up pennies. In other words, “don’t sweat the
small stuff.” Sellers and buyers can sometimes lose perspective,
concentrating on little items, while the transaction slips away.
Expending time and energy on minutae increases the risk that one
side or the other will tire of the process, and look elsewhere.
A good example is buyer repair items that are more cosmetic than
substantive. A laundry list of repair items can send a message that
they buyer is fly-specking the property and may be difficult to
deal with in other aspects of the transaction.
Additionally, Realtors® must avoid the risk of inserting their
individual preferences into the transaction, except where doing
so is critical to the success of the transaction. Probably the best
example is the selection of the title or escrow company. It is one
thing to pursue a “preference” for a particular company
– it is another thing to make the issue a deal breaker. If
you can give up on one personal issue, but achieve other more significant
concessions that benefit your client, the choice should be clear.
3. Don’t Wait –Anticipate.
There are many, many, examples of how you can proactively deal with
anticipated problems before they become deal-killers. Insurance
coverage is a common problem today, although many sellers and buyers
are unaware of how significant the issue can be. A good seller’s
agent will discuss this with their client at the start of the listing
period, so that the issue does not arise for the first time in the
middle of the transaction. A good buyer’s agent will also
recognize the insurance issue at the outset of the transaction and
make sure their client explores their alternatives as soon as the
deal is signed up – if not before. If the buyer encounters
problems, or if he or she needs assistance, both Realtors®
should be prepared to become involved in the search for coverage.
Sometimes, this extra effort is the only thing that keeps the deal
together, especially with buyers who become easily discouraged or
believe they have other alternatives.
Underground storage tanks and EIFS cladding are additional examples
of conditions that need to be addressed at the front end of the
transaction and where the presence of a proactive Realtor® can
mean the difference between a successful closing and a sale-fail.
If you are aware of a potential problem involving the condition
of the home – either on the listing or selling side –
make sure your client fully understands the issue, the choices,
and the potential costs related to those choices.
4. Knowing When to Hold ‘em And When to Fold
‘em. Sometimes a transaction is just not meant
to be. If you and your client have to work too hard to keep the
transaction together, it may be time to ask whether the deal should
be terminated. We might call this “the high-maintenance transaction.”
An example might be where the buyer has trouble with the financing
contingency, and needs continuous seller concessions in order to
keep the transaction together. Another example is where the buyer
constantly demands repairs after the closing of the contingency
period. A third example is where the buyer refuses to compromise
with the seller, where a previously unknown condition is discovered
in the middle of the transaction. Taking hard-line uncompromising
positions can be symptomatic of a party who is used to getting their
way. In many cases, where litigation has been commenced, it is initiated
by a buyer who was demanding at every step of the transaction. In
these cases, sellers often reflect – albeit too late –
that they saw this coming early on but did nothing about it when
they had the chance.
For Realtors®, the task is to make sure their respective clients
understand the risks and rewards of the transaction. If the other
side of a transaction is making it particularly difficult, the Realtor®
has a two-fold responsibility: (a) Making sure that they discuss
with their own client the pros and cons of continuing to remain
in the deal, and (b) Discussing with the other Realtor® their
responsibility to regain control of the transaction – at the
risk of seeing it fail.
Conclusion. Win-win-win transactions
are measured not only by whether the deal closes, but whether
the client comes back and refers others to you. Return business
and referral business are the best measures of a successful transaction.
This means that in the eyes of the client, you added value to the
deal. You not only facilitated the closing by handling all of the
necessary details and paperwork, but you did so in a manner that
left the client confident that they made the right choice by selecting
you in the first place. Referrals are an affirmation by the client
that they believe you will provide their friends, relatives, and
even strangers, the same high level of service you provided them.
FOOTNOTES
1
For example, in the settlement of
litigation, I try to follow what I call the “equal dignities”
rule. If you try to take everything, leaving nothing for the other
side – not even their dignity – you will find that it
is much more difficult to completely settle the dispute. History
taught us that as well, with Germany and the Treaty of Versailles
at the end of World War I.
© Copyright 2004. Phillip C. Querin,
Davis Wright Tremaine. No part may be reproduced without the author’s
express written consent.
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