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Added: November 19, 2004
Article rating: 3.17 (of 5) - 205 votes

Negotiating the Contract Minefield - Protecting Yourself and Your Client

[ by Ron Thibeault ]
One of the occasional and more serious complaints from clients that I used to hear as a real estate lawyer was that the house buying process passed them by.
Usually, this was followed by a complaint that the real estate professional really didn't work for their money..
The end result for the real estate professional was that here was a client that was not going to return in the future. Either the client would hire another Real Estate Agent and negotiate very hard on commissions or else they would go the FSBO or discount route. In either case, the result is an additional force on Real Estate professionals to decrease fees in order to win work.
Well, there are some things that are beyond your control in preventing this situation, such as the work of the opposing Real Estate Agent and how the buyers and sellers react to negotiations. However, there are a number of things that you can do that will help alleviate this situation and help prevent it from arising. The end result is happier clients overall and more repeat business.

1. Go through the listing contract


This may seem obvious but it is amazing how many times clients feel that they did not go through the listing contract OR that they did not understand it in the least. You may go through the contract with our client but are your certain that they understood what you said?

Clarity is everything when it comes to contracts. Unfortunately, even the contracts that claim to be in "plain language" are couched in legal concepts that are vital to understand. In my jurisdiction, the listing contract states that clients are to seek the advice of counsel before signing the listing contract. Guess how many of them seek counsel… right… nearly zero! So this means that YOU are their source of reference for this contract.

This provides an excellent opportunity for you to use your special relationships with other professionals. If you normally refer work to a real estate attorney, why not ask that attorney to provide you with a document that explains the various clauses in your listing contract. Ask them to prepare a sheet with each section of the contract on it with an explanation of what it means below. Provide this to every client before you sign the listing agreement or at your listing presentation.


2. Explain the selling process to your client
Here's another thing that gets overlooked continually. At the heart of this problem is the fact that clients don't perceive you to be working hard on their transaction. This is more of a problem for sellers than for buyers. They see you place a sign on the lawn, maybe they see your ad in the paper and maybe they see you at an open house or two. Ever wonder why they question your fees?

Clients don't understand that there are a number of things that a Realtor/Agent does behind the scenes or that there are a number of costs associated with their transaction. This is your job to ensure that they understand what you will do BEFORE you start.

Too often, this is the subject of discussion after the client grumbles about the fact that nothing was really done to sell their house. Waiting until that complaint arises is too late and results in a lost client. Outline to the client exactly how you will market their house. Ask for any suggestions that they might have (you might learn something). In other words, involve them in the process. The result will be more work in the future.

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3. Explain how the offer/counteroffer process works.
The most frustrating time for a client is the actual negotiation of a potential sale. Remember that most clients never negotiate contracts larger than a home sale or purchase. This, combined with the stress of buying or selling an item of emotional attachment, is a recipe for complaints.
Clients should understand right from the start that not every negotiation leads to a sale or that every negotiation will be smooth. One of your jobs as a real estate professional is to help your client through this process. One of the keys to helping your client is to have them understand what may happen before it happens!

The time to explain potential changes to a clause is at the original time of listing. For example, in our jurisdiction, the seller was to provide a current Real Property Report. Guess how many times that clause was changed? Guess how many times clients complained about the change years when they went to sell and were forced to provide a new one?

In that case, clients should have been aware going into a negotiation that the seller may try to change that clause and what the potential results may be. Again, this is where you can rely on your professional team to help you out. Have your trusty lawyer prepare a document outlining which sections are most likely to be changed and what the effect of those changes can be.


4. Don't' Pull a Houdini!
Did you know that a number of clients, and lawyers for that matter, believe that you disappear the minute the deal is signed and all conditions are waived? This is one perception that is hard to deal with but severely impacts your overall relationship with clients.

You know how hard you work after a deal is closed but does your client know it? Not likely because what you are doing is likely working behind the scenes phoning the bank, phoning the lawyer, phoning the other realtor. Your client has absolutely no idea this is happening unless you tell them!

The catch-22 of this is that if you aren't telling them and a problem arises the perception is that the client is left to deal with it on their own. If you aren't telling them and the deal goes smoothly the perception is that you weren't really needed! How can you combat this?

The first thing to do is to phone your clients regularly after the deal is firm but is not closed. Keep them up to date on what everyone is doing. Show yourself to be the commander in chief, the general of this white collar army!

The second thing you can do is to provide written updates to your client either via the mail or via email. Have an assistant prepare a daily log of things that are happening or will happen on the deal. Send this to the client and keep them informed. Clients have a sneaky way of associating closest to the party that gives them the most information.

Finally, you can do the little things. For example, why not offer to drive your clients to the bank to finalize their loan or drive them to the lawyer's office to sign papers. They may not need your service but what does it do for the impression of your service. The offer itself is what is important. I know of one Realtor who has a 18 year old daughter in University. She provides babysitting to his clients with small children for when they go to see the lawyer. He pays her for the service, helps her with pocket money for school, gets the tax deduction and gets the reward of his clients loving him even more!

These are only a few things that you can do to help your clients negotiate their way through a house transaction. The key is to remember that client servicing does not end at the signing of a deal and that your clients must know that. You work hard for your money… isn't it time that your clients know that?

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Ron Thibeault is a retired real estate lawyer and contributing Editor to ThinkRelo.com. His extensive experience in real estate law gives him valuable insight into the needs of clients, Real Estate Agents and all other players in real estate transactions.

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Current rating: 3.17 (of 5) - 205 votes
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