Real Estate is a Compliance-Based, Standardized Business…The Agent is Easily Replaced.

The more we work to standardize the real estate purchase agreement, the closer we get to eliminating the real estate licensee from the transaction. 

Programmed computers are better than humans at compliance-based work. We prove we believe this by suppressing innovation and forcing licensees to check the same boxes and write the same words in the blank spaces, with little regard for their customers’ and clients’ circumstances. To see this in action, attend a real estate training session, or sit in on a forms committee meeting. Talk to REALTORS. Ask them WHY they check this or that box, include this or that contingency, and fill in this blank but not that one. The answer is likely to be a version of “That’s the way we always do…we were taught to do that.” It doesn’t matter if they are relatively new or seasoned licensees; repetition and standardization eliminate the opportunity for customization.  

Ask the leaders of the committees assigned to revising the existing real estate forms why they choose to include standardized contingencies where there had not been one before? Is simple and the same better for the consumer? How do we know?

The Price of Simplicity

 Without thinking and customizing purchase agreements to the situation, and the parties’ personal preferences, the differentiating factor between offers is the price. And when the price is the only way to differentiate, the consumer will pay higher and higher costs. When the consumer can find something less expensive and more effective than the common real estate licensee, they will turn away from REALTORS and run to the innovative, robotic alternative surely to become available sooner than later. 

Think. Customize. Learn. Resist Becoming Trained.

When the real estate industry looks at their business from the perspective of delivering a better product to the consumer, standardization and repetition will be seen for what they are; detrimental to the consumer and the broker. Tech giants see the future of real estate is in robotics and AI. The non-thinking, box-checking licensees, will be out of work. The computers can pick the boxes to check and the words to write in the blanks, and they can do it more accurately than humans. Those who have a future as a real estate licensee will be the people who think, learn, customize, and contribute to the consumer’s better experience.    

The solution to overpaying is in the Offer.

Two lines is all it takes to include a price in an Offer. The remaining 579 are dedicated to the rules of the transaction, and the promises made with exceptions. On price alone an Offer might be judged good or bad. It’s the easiest condition to see and when it’s good, it shines like a bright star. So bright in fact that a person may overlook the essential aspects of the Offer. Rules and caveats are ignored at great peril. Price is a one-time thing; security lasts longer.

Getting the most money in the shortest amount of time is said to be the goal of home sellers, and maybe it is until we have more information. When we take the time to look at the ‘more information’ we discover that security, not price is the overriding factor in negotiations. Price being objective ($100 is greater than $50) is simple to see. Security is subjective. (A $100 bill today that I can never spend is not as appealing as a $50 bill I can spend in a week.) It’s harder to see but becomes clear when we know what the rest of the words mean.

Real estate transaction drafting is primarily a trained practice. When working with a practitioner trained to insert this here, that word there, and cross this off but not that, the client is left looking just as unprepared and insecure as the next person. A wise seller will not get tied up in an uncertain contract. A big price won’t distract them from the clutter of the Offer.

On the other hand, the person working with the professional who understands that the contract is filled with qualifiers, exceptions, caveats, and cautions will have more to offer to appeal to the desires of the seller. Price will always be a factor, but it’s not the only factor. It is in the lack of conditions where buyers are given a chance in highly competitive markets. Knowing how to structure Offers is a skill under developed in the world of fill in the blank and check the box, one-size-fits-all, standardization. At Essential Real Estate we made it our business to know the conditions of the contracts so our clients can make informed decisions about what goes into their contracts, and what is left out.

On The Hood of The Car

In the middle of a movie, while the kids want our attention, when it’s nearly midnight. Are any of these safe environments where you do your best work? A University of Minnesota study revealed multi tasking is a killer on our ability to remember. When remembering the directions of a client, or the caution you heard a week ago, a distraction free environment is a safe place.

There was a time when writing an offer on the hood of the car was fairly common. The WB 11 wasn’t the back of a napkin, but it wasn’t the complicated instrument it is today. Maybe the hood of the car has been replaced by the coffee shop down the street. Neither place is where we do our best work.

Building your business on sound practices of safety will never do you wrong. Compare the coffee shop to an organized desk, a quiet place, free from interruptions and sufficient time. Multi tasking can be done. Doing any of those tasks well is an illusion.

Fear No One. DIY Real Estate.

Know what to look for. Know what you want. Negotiate success by knowing what the contract says.

Fear is a great motivator. Marketing experts quickly turn to fear messages to drive customers toward their business. Maybe this is a first choice option when a business owner knows their offering isn’t appealing enough to attract customers. Even if fear messages inspire some people to rush to be saved, what’s the net effect of fear messaging on a business?

The real estate industry has a long history of banking their business on fear marketing. Analytics are readily available to measure the consequences of any marketing message, and I wonder what the evidence shows about the impact of inspiring people by fear? Without a study, I’m going to believe short term favorable results do not equal long term consequences in the same way that crying wolf, “FIRE!” in a crowded theater causes suspicion, not action, as a first response in the future.

When a real estate business warns consumers that they see a world of risk of loss, dangerous consequences, and potential for peril in a real estate sale, I’m not going to disagree with them. People who see opportunity as risk probably do so for a reason—they’re well versed in causing complications in a transaction. It’s entirely possible a real estate transaction is risky in the hands of the fear monger.

Through the efforts of the State of Wisconsin, attorneys, bankers, and REALTORS, standard real estate contracts are designed to make sales in Wisconsin relatively simple, and fairly safe for residents. As the years go by more good and not-so-good ideas become part of the real estate contract and the document balloons to nine pages, and then to 11, or 13, or 21.

Trigonometry, rocket science, brain surgery and statistics are complicated for those who don’t know what the scientists know. For those who commit themselves to the practice of science and math solutions to the problems come quickly.

Real estate is not rocket science. But it’s also not point and click, check this box, not that one, fill in this blank with this, and that one with that. With a logical understanding of the pre-written provisions of contracts it’s easy to develop a base of competence to confidently negotiate safe and sound terms regardless of who’s on the other side.

With confidence in place of fear, fewer errors are made, fewer chances are taken, and expectations remain reasonable. No promises you’ll net more money or buy a home at a discount. But I do promise your opportunity for peace and happiness without fear increases dramatically by knowing a little more than the folks on the other side.

I believe better transactions are better for our industry. I’m not offering free market price opinions. Anyone can do that. But I will meet with you to help you learn what the contract says. No charge. The payback is in the long term.

Use Days to Change Days, Dates to Change Dates.

Months of meetings turn into years before form committees birth a document and name it WB-11 Residential Offer to Purchase. Eight years is old for a WB-11 considering how much change happens after birth. Expect to see a new WB-11 introduced to our world in 2019. To say every word that makes it into a form is scrutinized might be an exaggeration, every word in the document matters when a problem arises.

The WRA attorneys stress the importance of precision when drafting contracts and still common deficiencies show up when things go wrong as they sometimes do. We can do better. This suggestion is simple to implement and you will want to use it when you understand the difference.

Always use number of days to change numbers of days, dates to change dates when amending or countering an Offer to Purchase.

The Financing Commitment, Appraisal, Inspection, Closing of Property, and Secondary Offer contingencies use “X” number of days to establish deadlines. When the deadline is approaching and it’s clear the chore that needs to be done is not going to be done prior to the deadline, changing the deadline by “X” days keeps the contingency making logical sense.

As an example let’s say the Inspection contingency on an Offer accepted January 10th was to be deemed satisfied unless Buyer, within 10 days of acceptance, delivers to Seller a written Notice of defects. Today is January 14th and it’s clear the Buyer now needs more than 10 days to satisfy this contingency because the inspector can’t get there sooner than January 21. We know 10 days ends on January 20th. The Buyer needs to request more time to have the inspection, review the findings, and Notify the Seller if there are defects to which the Buyer objects. Buyer would like to have 5 days after the inspection for the deadline. The request goes from Buyer to Seller via an amendment. (Nope, we are not going to ask the listing agent if it Okay.) Your amendment will be concise and keep the term of the contingency exactly as agreed when you write your amendment like this:

Inspection Contingency. Lines 410-433. Line 421, change “10 days” to “15 days”.    

Say no more or less and the buyer and seller and all the agents know the only change to the Inspection Contingency is that number on line 421. Ten days is now 15 days. The Buyer has 15 days from the date of acceptance to send a Notice of Defects to the Seller.

We put too much extra into the job of amending offers when we change from number or days on the WB-11 to dates and the amendment. And for that extra work we have a potential disagreement. For example we see something like this often: The inspection contingency is extended to January 25th.

What’s the problem you ask. The deadline date is January 25th by changing the days to days and by changing the discussion of days for a deadline to a date. Or is it? Maybe not. By changing the number 10 to number 15 the Buyer has through the 15th day (1/25) to deliver the Notice. (Within ___ number of days is defined in the Offer) By changing the conversation to include a date the deadline is arguably midnight January 24th. Seller argues the “to” in “to January 25th” as the moment January 25th starts and January 24th ends. The Buyer delivers Notice on the morning of January 25th and the Seller responds by saying the contingency expired the moment the second hand passed 11:59 am January 24th. Until. You disagree? Who decides?

Can we make it more complicated? Sure. Was it the buyer’s intent to extend the “Inspection” or the deadline for delivering notice of defects? There is no Inspection deadline in the Offer as written. There is a deadline for delivering a Notice of Defects, but that’s not what the amendment referred to and if the original language is still in the Offer, the deadline passed with the date of January 20th.

These disagreements are not unusual. Every word in a contract means something to an attorney. Opposing attorneys may disagree on the meaning, and it’s expensive (but fascinating) to watch them argue it out in front of a judge. To avoid the expensive courtroom drama, to keep the transaction from falling apart someone may have to contribute some money to the cause. If I’m the one who created the confusion by something I wrote, making it right might be at my expense.

Unprepared, uncommitted home buyers load up on contingencies.

What’s the radon level in the building where you live today? What about at your office where you spend at least a third of your every day? About 20 hours of every 24 are spent in these two places, and not once has the typical home buyer tested these environments for radon gas. And yet, the typical home buyer includes a radon test in their Offer to Purchase. Radon gas is everywhere. Every house has radon gas. The EPA has established no safe level of exposure to radon gas. After remediation the radon gas level still will not be zero.

Consider this: There is no contingency that you will get financing. There is a contingency to get a commitment letter, but that could be gotten before you leave home to shop for houses. What’s a defect? A typical home has “defects” as defined in the Offer. The typical concession after an inspection, in even the most expensive homes, amounts to pennies relative to the purchase price. And still almost every offer includes a contingency to inspect and find no defects. Neighborhood restrictions are typical. If they might prohibit something you want to do, you could discover this before you spend any time looking for a home in that neighborhood. And yet, there it is included in Offers to Purchase.

Why are these contingencies loaded into Offers? They’re there for the benefit of the buyer, and by benefit I mean exit door. A contingency allows a buyer time to decide if they want to buy, and time to continue or restart negotiations. A contingency is advantage buyer. For every condition a contingency has been created, a resolution prior to making the Offer is possible. The resolution is always knowledge and understanding. A prepared home buyer is the buyer all owners want to be in business with. Being prepared is easy when you know what to prepare for.

This spring you may buy a house. If you’re prepared your chances of owning your first choice home will increase dramatically. Between now and then, get yourself fully pre-approved for financing, study up on radon gas, how a real test is conducted, and the cost of remediation. Get the facts on lead paint. Learn the cost of repairs you know you can’t afford. Review your contract strategy with your attorney.

The typical home buyer will wait until they have an accepted Offer to do their due diligence. The typical buyer loads their Offer with contingencies, and contingencies tell owners “This person isn’t prepared”. Given a choice, owners will accept offers from people who are most prepared and show their preparedness by loading their Offer with assurances, not contingencies.

It depends upon what the meaning of “is” is.

Skilled magicians and lawyers are alike in their ability to amaze and baffle.  Both can take one thing that is clearly one thing, and before our eyes make it be another thing.  I could watch a magician for an hour, but a lawyer will keep me mesmerized until sunset.  With a flip of a word, a comma out of place, an interpretation of a definition of a word, lawyers turn believers into doubters with remarkable ease.

“There is nothing going on between us..” Bill Clinton had not lied under oath he contended, after facts of his relationship with an intern had become known.  “It depends upon what the meaning of “is” is.” from the perspective of the President, an accomplished attorney well versed in the art of twisting  words to alternative logical conclusions.  

Contracts used in real estate transactions are created with heavy input from lawyers.  If a lawyer wrote a sentence, there is a good chance every word has relevance. It may depend on the meaning of the word, and as long as the meaning is questionable, the outcome is disputable. 

Licensees draft contracts to an extent. Well we fill in blanks, check boxes, and within limits we free hand write some conditions the parties will rely on.  When getting an offer accepted or moving on to the next step is most important, care for proper sentence structure, punctuation, and definition of terms are at risk of being overlooked. Our license law requires we write what the client directs us to write. If we are surmising the intent of what the client wants, we’ve come up short. Getting it right is expected of us.

And when we get it wrong, all is well, until it isn’t.  Regardless of how kind, eager, committed, friendly, related, a person is to the licensee, when the source of conflict in a real estate transaction is traced to the licensee, there’s a better than good chance we’re going to lose.  As long as we are willing to spell out a person’s concerns, plans, expectations we are exposed to being challenged.   I actually like that challenge. Not everyone does and I understand.   There is no reason to fear consequences when you develop your contract drafting skills. With all of the free University education on-line, becoming trained by the same people who teach lawyers is possible. We don’t have to become lawyers to think from the perspective of a lawyer. Just be a learner. It’s worth the effort, but you won’t know it until there is a problem and it has nothing to do with your role.  Here  is a link to one resource for access to 1,300 universities. Take your pick, Oxford, Harvard, MIT. Oh, you don’t need to be a contract geek to get better at drafting, you only need to want to learn.