I always tell my clients that I am here to help. I am here to make their transactions easy. I am here to help relieve stress and pressure. I am here to answer questions. It is a familiar refrain. So why do clients wait until it is almost too late, if not actually too late, to call when they need help?

Just the other day, a friend stopped me and asked me if she needed a title search for the new house she was buying and closing on in a few days. I had done a closing for her several years before and she had referred other people to me, so she knew how I practice. My eyes grew very wide as I told her “of course you need a title search and title insurance”. “Will it take long? Will it cost much” she asked. After a lengthy discussion, my friend e-mailed her contract to me so that I could jump in and handle the closing for her.

What I learned what that, because the house was in Martin County, the seller was to provide the title and had selected the title company. The title commitment had already been issued but because my new client had no attorney, the title company didn’t bother to send it to anyone. When we called to ask for the commitment and copies of the closing documents, we set off all kinds of alarms. The client’s real estate agent became defensive. She said that the title company was handling title and we weren’t needed. Perhaps we had been hired to handle the sale of the client’s house. UH OH! I thought we were working with another real estate agent who doesn’t want to work with the client’s attorney. What is she hiding? Likewise, the title company was uncooperative. Once they knew that we were involved, they should have automatically sent us everything. However, we had to ask for every piece of paper, document by document, page by page.

At this point, it occurred to me that I needed to write this post. I’ve written about the need for real estate attorneys for residential closings before (see post HERE). Obviously, this closing is another example of that need. Your agent should protect you, but an agent is not an attorney and some agents, to this day, believe that attorneys only screw up deals. Good agents don’t think that way. If an agent steers you away from an attorney, you have a bad agent. Relying solely on a title company is also a bad idea. Title companies close title. They are responsible to follow bank instructions and escrow instructions only. They are responsible to the underwriter. If you don’t have an attorney, you likely aren’t providing sufficient instructions to the title company and therefore, aren’t getting adequate protections.

But this post isn’t just about using an attorney. It’s about answering the question, when should you call your attorney. Answer: not 10 days before closing! Here, we were able to clean up messes and prevent the client from accepting title with improper and unacceptable title exceptions. However, we did not have enough time to obtain a survey. The real estate agent told her she didn’t need once since she wasn’t getting a loan. (See prior post on need for surveys HERE).

Certainly, don’t wait until 3 days before closing. This same client got totally freaked out when the closing agent for the sale of her house contacted her real estate agent (a different one) to ask where the closing documents were. The closing agent also scheduled closing for 2:00 in the afternoon. The purchase of the new house was scheduled for 3:30 the same day. Funds from the sale were needed for the purchase. No one told the client how she was to provide the closing documents, how she was to get from Broward to Martin County in an hour with the closing funds or how all this was to work. She was a wreck. I now had 3 days to work it out with the buyer’s closing agent, do the documents, solve any title issues and coordinate 2 closings instead of 1. Both contracts had been signed 7 or 8 weeks prior.

And, finally, 2 days before closing is definitely not enough! My partner, Eric Assouline was with his client 2 weeks ago at a summary judgment hearing. After the hearing, the client casually mentioned that he was closing on an “investment property” in 2 days and needed to “protect” that property in case they lost in the litigation. Eric came back to the office to discuss with me. I asked Eric why we were just hearing of this now. Eric shrugged. Had the client talked to us at the time he signed the contract, we could have devised asset protection strategies and properly closed on the property. 48 hours prior to closing? The client had to proceed.

Like I said, I am here to help. But don’t wait to call. Don’t wait until the last minute!

That’s what the broker said to me a few weeks ago as I was negotiating the final points with the other attorney on a purchase money note for a small business deal. The broker wasn’t involved in the conversation.  It was a simple e-mail exchange between the other attorney and me.  At some point, the broker was copied in.  My final comment was a small one.  The attorney didn’t object.  But it offended the broker as it might cost his client, the buyer, a whopping $150 at some point in the future.  It was a technical point that the buyer had to pay, but, because the contract was silent, the broker was adamant.  “Are you really going to blow the deal over this” he e-mailed me, with multiple question marks and exclamation points.

Why is it that the smallest deals cause the most grief? And, why is it that this type of thing always happens when clients don’t think to hire an attorney until after the contract is signed and closing is imminent?  In this asset sale, the client called just 10 days before closing.  Given the timing and the size of the deal, I probably should have referred her out to someone else.  But, that’s a conversation for another day – I took the case.  Reviewing the contract, it was clear that this seller should have called before ever signing.  The broker did her no favors.  It was too late to renegotiate the deal.  I just had to make sure that she wasn’t taken advantage of any further.  Thanks to Hurricane Irma, the closing was delayed about a week.  Until this moment during the process to get to closing, there were no glitches.

Negotiations should not ever be construed by one side or the other as a ploy to blow a deal. Parties to a transaction should be free to seek out the best deal possible and to look for language in every document that best suits them.  When a request is made by one side, the other side should be free to accept, reject or counter propose.  Negotiation is give and take.  There is compromise and ultimately there comes a point when both sides have to make a decision.

When the broker asked me if I was trying to blow the deal, it would have been easy to tell him off. I could have easily thrown his comment back in his face and made the point that he was the one who was killing the deal.  But that would have served no purpose.  Litigators like to quote the old adage, “when the facts support you, argue the facts, when the law supports you, argue the law and if neither supports you, distract.”  I think that’s what this broker was trying to do – distract from the point as he had no argument to make.  I had the better argument and taking the high road would get the desired result while making it clear to both the buyer and seller who was hurting the deal.  By explaining to the broker that negotiating and requesting that provisions and language be inserted in a closing document is part of the closing process, I did not accept the premise of his comments.  I then offered to allow the buyer to pay the potential liability up front at a small discount as a debit/credit on the closing statement rather than as part of the note on the maturity date when the liability would be determined.  Clearly, I was willing to compromise and not kill the deal.  The broker quickly backed off and accepted my original change and I never heard from him again.

Interestingly, the buyer’s attorney, who had not objected to my request initially, disappeared during this rapid exchange of e-mails. I wondered why he hadn’t simply told the broker that my position was correct, or not unreasonable and that there was no reason to worry and that I was not out to kill the deal.  Did the attorney think he missed something and now was thinking he needed to save face?

Bullying in negotiations, which this broker clearly attempted to do, will get you no where. If you are bullied, don’t back down.  It only means that the other side is grasping at straws and is in a weaker position.  Use it to your advantage.

Back in the 90’s, there was a commercial where a famous actor, I can’t remember who, was pitching a product. His opening line was “I’m not a doctor, but I play one on TV”.  This was supposed to give him some credibility about the medicine he was endorsing.  In my line of work as an attorney, I often feel like some of the people I come across in a transaction live by the same credo – “I am not an attorney, but I play one in this transaction”.  Whether intentionally or unintentionally, the different players in a real estate deal find ways to play the role of attorney, going so far as to draw legal conclusions that can be harmful to the client.  The worst part is that sometimes, when I try to correct the offender, my efforts are not well received.  Two recent examples.

I represented a couple purchasing property in the Florida Keys. They had signed the contract prior to forwarding it to me to handle the closing.  The property is on the Gulf so it is rather pricey.  Both brokers were involved in the preparation of the contract, which was a FAR/BAR form.  The parties had agreed that the Buyer would pay all of the Seller’s closing costs.  One of the brokers had made a handwritten change that simply said “real estate taxes” under the list of Seller expenses.  The contract was signed electronically via Docusign.  Nobody changed the tax proration paragraph.  When we prepared the closing statement, we put all of the Seller expenses except the broker commission on the Buyer’s side and we prorated the taxes.  The Seller’s broker objected, claiming that the Buyer was to pay real estate taxes.  I did not read the contract that way, because in Florida, 2017 taxes aren’t due, and there were no back taxes due, notwithstanding the handwritten change.  Further, the taxes were to be prorated and no changes were made to the proration paragraph.  I checked with my client and he said he was unaware that he was to cover the Seller’s share of the 2017 taxes.  No one had explained that to him.

The Brokers insisted that the changes to the contract were correct when a simple change, deletion of the proration paragraph would have done the job. The Brokers, both experienced, were very upset that my client was changing the deal and that I was giving him the power to do so.  But the fact was, at best, the Brokers created an ambiguity in the contract because they did not consider all of the terms in the contract and attempted to modify the pre-printed terms and took a short cut.  In essence, they played attorney, and did not do so very well.

On another deal, a client purchased a large tract of land in Orlando last year. The property was legally described as 5 separate lots.  As part of the development of the property, we re-platted and legally described it as 2 separate lots.  During this process, the client entered into a contract to sell a portion of the smaller of the son to be platted lots.  The closing occurred days after the plat was recorded.  We knew at the time that this might cause some confusion down the road for those searching the deed and therefore, we used both the old legal description and the new platted legal description when we recorded the deed.

Recently, we learned that the Orange County property appraiser had listed nearly two thirds of the overall property as owned by the buyer of the property the client sold. This was an obvious mistake.  So, after a couple phone calls, the inquiry made its way to the chief mapper in Orange County.  He revisited the deed and concluded that our deed was not correct and “directed” us to record a corrective deed.  This is a legal conclusion that the mapper is not qualified to make.  But before I called back, I circled back with my title underwriter and surveyor just to make sure that I hadn’t missed anything.  I didn’t.  While this matter has not yet been resolved, I had to advise the mapper that if he could not agree with our surveyor, we would not accept his conclusions nor would we act on his directive.  Therefore, we would only deal with the property appraiser’s general counsel.

I could probably write pages of stories like this. Clients can be the worst offenders.  Sometimes, the best strategy is to grin and bear it.  But, the line in the sand is that no decision can hurt your client or your client’s cause.  And then, please listen to your lawyer.  We don’t just play one on TV!

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        A recent Redfin survey found that 60% of home sellers over the last year received a discount on fees received from their real estate agent. The average discount was 41%. In the same survey, 46% of home buyers reported receiving a closing cost refund or closing cost contribution from their agent. The average refund or contribution was $3,673.

             Redfin reports that these results are not surprising and in fact, are part of a 10-year trend. However, in their Blog about the survey, Redfin attributes its own services as some of the primary reasons for these trends. Of course, this makes the survey a self-serving promotional vehicle. But, I don’t think that the results are wrong. There are valid reasons for agents to contribute to their clients. These reasons are not just financially driven for the agent. They are also ego driven for the sellers and buyers. Let me explain.

            Buyers and sellers of residential properties almost always have unrealistic expectations. Nearly every seller thinks that their house is worth much more than market value, that they know more than the best of appraisers and their own agents, that the upgrades they have put into their homes make their house unique and that their house is the best and most valuable in the entire neighborhood. Sellers have an expectation when they list their homes as to a minimum sales price and a corresponding net cash in pocket at closing. Contrast that with the typical buyer. A typical buyer has a magic number in his or her head – a price ceiling. A buyer does not think about or understand how a few thousand dollars of purchase price amortizes to only a few dollars per month on a mortgage payment. If the maximum price is exceeded, the buyer would rather walk away from a potentially perfect property.

             Then there is the problem of inspections and repairs. Egos get in the way here too. Buyers and sellers argue over costs of repairs and who is responsible for them. I am not talking about major repairs like the need for a new roof. Those need to be dealt with. I am talking about the small ones like the broken door knobs, torn screens and faulty light switches. These are things that every homeowner has to repair at some point. There is little to no cost, yet sellers refuse to fix or pay for them and buyers won’t close without a credit or without the repair. How many times have closings been delayed over less than $1,000 worth of repairs? On million dollar homes?

             What about the high cost of financing? While interest rates remain low, the cost of credit is not. Points and fees are costly. And, the costs of the closing itself are also not cheap. When all of these factors are taken together, agents look to bring their clients closer to their initial expectations – what did they think they were going to pay or receive when they got into this deal? Listing agents reduce commission to get a little more cash to seller and procuring agents reimburse some closing costs to buyers to reduce out of pocket costs and the necessary cash to close. This is an ego stroking move by agents. A half a point in commission, or a couple thousand dollars goes a long way to making a client feel better and might get a referral or two for the agent down the road.

            Finally, add to the mix the competition the agents must feel. Inventory is low. There are fewer deals to close and that means there is less commission income for agents. Good agents do what is necessary to close, including leaving a little money on the table. This is not a science. We don’t have to do broad market research to figure out the reasons. It’s about ego and it’s about the next deal. It’s what the market demands.

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        I love having a good commercial broker on my team. A good broker is much more knowledgeable about the economics of a potential deal than I will ever be and understands the market better than me. A broker who knows his or her stuff will have done the heavy lifting on putting the deal together, negotiating the essential terms and completing initial due diligence before I am brought into prepare the operative documents and close the transaction. When we get to sticky issues, the best brokers can play good cop to my bad cop or vice versa.

             But sometimes, you get agents, and I am purposefully switching to the term agent here, who get in over their head. These agents should not be handling commercial deals. I am talking specifically the agents who are residential agents who attempt to get involved in commercial deals. Either they see an opportunity for a bigger commission and believe that commercial deals are no different than the house closings they are used to closing or, they are working with a friend or relative “as a favor” (and the commission is an added bonus). When a residential agent is involved in a commercial transaction, I, as the attorney, have to take extra special care with my client because I know that the client has not been represented well before engaging me and is likely not sophisticated in the world of real estate.

             Just the other day, I got a call from an agent who was referred to me by a friend of a friend. She was representing a client who was going to open a new café in the Edgewater area of Miami and needed a lease reviewed. Of course, this was an “urgent” matter and the lease had to be signed by the end of the week. The agent wanted to know if I could review the lease by the end of the day. My alarms started ringing. I asked the agent why the rush. She told me that the landlord had a lot of interest in the space and the shopping center was very desirable. I told the agent that I could begin reviewing the lease that day, but there was no way that I could finish it by the end of the day. Without asking, I told her that I could surmise the length of the lease and that to give it a thorough review, I could not read it that quickly. But more importantly, I asked the agent if she had done any due diligence on the property. She was befuddled. What did I mean? I asked her if the space was zoned for a restaurant. She told me that it was previously used as a Papa Johns so zoning wasn’t an issue. When I told her that because Papa Johns generally had no seating and that because the client’s café likely would, zoning might be an issue. In addition, if any alcohol was going to be served, zoning and use issues could also be an issue, not to mention liquor licensing. Had she checked any of those questions? The agent said she had not. I asked her who was going to be paying for the TI and how long the TI would take. Did the client need the pizza oven? She had no answer.

             We chatted a little longer about other issues that might come up in the lease and I explained that these were just a few of the reasons why it might take me longer than the day to review the lease. She thought that these were very good reasons and that she would definitely give my name to the client for her to call me to discuss my fees. I never heard from the agent again, nor did I hear from the client. I can only wonder whether the agent ever related my concerns or whether she was too embarrassed to let the client know that if she signed the lease, she was setting herself up for big time failure.

             It is nice to be able to throw business to your friends and family. But it is more important to have the right people working for you. Your friends, if they are really friends, should refer you to someone with the proper experience to help you properly. In the case I just mentioned, the agent should have referred her client to an experienced commercial broker who specialized in restaurant leases. A good broker not only would have steered the client into a proper property and lease and at least done some preliminary due diligence, but he would have likely paid the agent a referral fee. Everyone wins in that situation.

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