Even the "Grunts" see value in FSBO

An interesting post regarding FSBO, with some nice comments, by a "soldier in the trenches of the Manhattan real estate" market. Trenches? Man, you know the market is expensive when people are paying to live in a trench...

The Role of the Real Estate Agent

In yesterday's Seattle Post-Intelligencer (one of the two daily papers here in town), there was an interesting article on discount real estate brokerages. Discount brokers list a property on the Multiple Listing Service (the database of properties for sale maintained by real estate brokers, who in turn employ real estate agents) for a low, flat fee. The lower the fee, the fewer the services associated with the listing. As discussed in the article, there are several discount brokers in the marketplace.

I found the article particularly interesting, however, for a slightly different reason. In assessing the "changing paradigm," the article discusses the services typically provided by a real estate agent. The article quotes a local attorney, Matt Davis, at length. Mr. Davis works with the Demco Law Firm, which represents "some of the largest real estate brokerages in Washington," according to the Demco web page. They "provide on-call counseling and consultation to [the firm's] broker clients on all aspects of their business." Given that brokers are an important Demco client, it is not surprising that Mr. Davis emphasizes the services that can be provided by real estate agents (thus encouraging consumers to utilize them).

Regardless, Mr. Davis is certainly correct, to a certain extent: real estate agents provide valuable services to their clients. However, he takes the point a little too far. It is established law here in Washington that real estate agents can engage in the very limited practice of law by completing blanks in preprinted legal forms that were drafted by lawyers. Cultum v. Heritage House Realtors, 103 Wn.2d 623 (1985). Agents may not provide legal counsel or services beyond this narrow scope. The rationale is simple: agents lack the professional knowledge and skills expected of a practicing attorney.

There is certainly no definitive answer as to when a real estate agent crosses the line and engages in the practice of law. Mr. Davis indicates that an agent can protect a client's interests by understanding the pitfalls in a boilerplate contract and insuring that the contract is enforceable. Perhaps, but that sounds a lot like the practice of law, as the agent is interpreting the contract and taking steps necessary to render it enforceable. Mr. Davis further suggests that an agent is an appropriate "steward of the transaction," particularly where the transaction has soured and turned into a "war zone." This goes too far. If the transaction has soured, there is an actual legal dispute between the parties. Any guidance offered by an agent under these circumstances must, by definition, extend beyond the filling in of blanks in a preprinted contract. Accordingly, a buyer or seller should not look to an agent for guidance under these circumstances. Rather, an attorney should be consulted. Notably, by law an agent must persuade the client to consult with an attorney if the transaction possibly involves complicated legal issues. Cultum, cited above; RCW 18.86.040(c) and RCW 18.86.050(c), requiring an angent to advise the client to seek "expert advice" on matters "beyond the agent's expertise."

A real estate agent can and should work with the client in regards to valuation, marketing, and details associated with a transaction. However, if there is a legal issue, the client is better served by consulting with an attorney.

That said, and like Mr. Davis, I have an interest in this debate, as I represent buyers and sellers in residential real estate transactions. Furthermore, to be fair to Mr. Davis, I will alert him to this post so that he has an opportunity to respond.

Another Attorney's Perspective

I came across this interesting post the other day, by an attorney in Chicago who handles estate planning and real estate matters. It provides another attorney's perspective on FSBO transactions.

Penny wise, pound foolish

Earlier this week, I had an opportunity to use this venerable English expresssion. I received a call from FSBO sellers who had received multiple offers on their home. Each offer contained an escalation clause, although they all contained different terms (as they used different forms). I explained to the sellers that they really would benefit from legal representation, as they might not appreciate the differences between the terms of the various offers. Moreover, escalation clauses can be difficult to interpret and, if misinterpreted, a seller will lose money. I told the sellers that I would represent them in the matter and protect their interests for my standard flat fee of $750. They called back and asked if I would charge less if they decided to forgo my review of the three offers. I indicated that I would do so, but that they were missing the point, as the purchase and sale agreement is the most important part of the deal. Moreover, because of the escalation clauses and differing terms, they really would benefit from legal representation. They did not call back. I hope they got the best price possible and the most advantageous contractual terms, but I will probably never know. Regardless, given that their house was undoubtedly selling for hundreds of thousands of dollars, they risked a much greater loss by saving the $750. I guess if you like to gamble...

Of course, don't just take my word on it -- many, many people strongly recommend you hire an attorney when you are an FSBO seller: the Seattle Times, About.com, and the University of Nebraska, to name a few.

Housing Market Info

I am a firm believer in the For Sale By Owner ("FSBO") transaction. Although there are many obstacles to selling a home FSBO, a seller can generally overcome those obstacles with a little bit of research. For example, FSBO sellers often do not fully understand the true value of their home (and thus are unable to identify an optimum sale price). However, there are several web pages that can assist a seller in determining the anticipated market value of the property. HousingTracker provides real time market data for dozens of markets. The Washington Center for Real Estate Research, operated by Wasington State University, has market information for the state of Washington. The King County Department of Assessments maintains an eSales Search database that contains sale information for Seattle and the surrounding area (King County). Finally, web sites such as Home Pages, Redfin, and ShackPrices.com allow a homeowner (or home buyer) to search the neighborhood for a variety of data, including recent sale information. By using these sites, a homeowner is able to gain a better understanding of the true value of the home.