Classic risk aversion for the liability-phobic mandates that an agent make no actual referral to an auxiliary service provider in the course of a Real Estate transaction. Need a lender? Here are the names of three professionals. Need a home inspector? Sift through this stack of business cards and let me know who you choose to hire. The very thought of shimmying out on a limb to recommend a capable practitioner sends shivers up the clenched backside of some in our ranks. Cold anticipation of the potential commissionectomy that attends a referral gone bad trumps the tug of responsibility.
No businessman walks around looking for a financial colonic, but the very real potential for having his inner sanctum legally hollowed out exists in each and every transaction he undertakes. As such, it has become customary for many to simply ward off as much exposure as possible by abstaining from any form of guidance that can later be labeled malfeasance or conflict of interest. Heaven knows, if the contractor you recommend for repairs screws the electrical pooch, any rabid attorney worth his salt will gleefully encourage the client to pursue the deep pocketed brokerage (and agent by proxy) as well as the contractor for damages. Why put yourself on the line by recommending a home inspector when the potential for blow-back on a balky A/C unit can put you directly in the cross hairs? For that matter, why even bother to attend the inspection if the due diligence can be misconstrued for interference? Why attend closings if your review of the documents places increased responsibility upon your shoulders for their accuracy?
Because risk deflection is not my job.
My job is to fulfill my fiduciary obligations to my clients to the very best of my ability. That means recommending pros who have proven their worth to me countless times in the past, rather than crossing my fingers and hoping my clients receive competent service. That means attending inspections to physically see any defects, so as to better advise my clients and argue their cases. That means attending the closing to ensure that the settlement statement jives with the negotiated terms of the contract.
Doing the eeny-meeny-miney-mo thing with a referral does not serve the client, and neither does calling in “neutral” to the appointments that demand an ally. Such laissez faire Real Estating is designed only to mitigate the agent‘s risk. While it is understandable, given the litigious nature of our culture, it’s just not how I roll. You need a lender, I give you the name of the best lender I know. You need a home inspector, I give you the name of the most thorough one in the rolodex.
I would argue that recusing oneself from the crucial junctures and decisions of a transaction is not only negligent, but self-defeating. As the surest invitation for catastrophe is to stand aside and watch the transaction happen, the best defense is, and always will be, a good offense. Fixing potential problems, rather than hiding from them, has kept my clients happy, and me out of legal hot water to date. Active involvement serves the interests of all parties.
I wear my big boy pants to work every day. I put them on with the knowledge that certain forces will always be beyond my control. Secure in that understanding, I’d much rather stand behind the repercussions of my actions than my inactions. Standing on the sideline, not attending inspections & closings, carefully avoiding opinions … seems to me that ascribing to the Caspar Milquetoast model of risk avoidance is, ironically, the surest route to the ruin that one would desparately scramble to avoid. Decreasing the standard of care for the client is akin to an RSVP for trouble.
And trouble never sends its regrets.
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Great post Paul. I am of the opinion it is best to be a trusted advisor to help the client throught the home buying process. You do that by having a team of professionals you know you can count on.
I agree with you. How can I do my best if I am not telling the customer which home inspector I find the most competent? It's not even like that home inspector sends any business my way. He has hundreds of other great agents referring him. I recommend him because he's the best I know, not because I expect him to return the favor.
I agree, Mike. I must say that I find it highly ironic that agents do not have any qualms offering a direct referral to a fellow agent when a fee is on the line, but shy away from direct referrals in which they receive no compensation. Only worth the risk if a payday is on the line, I suppose.
I can't recall a single referral I've received from the lender, home inspector, contractor or title officer I prefer, Maggie. I don't use those "preferred" by my brokerage, either, just those who provide exemplary service at competitive pricing. Serve my clients well, and you earn my loyalty. No kickbacks, no expected reciprocation, nada. All such silliness pales in comparison to the allure of repeat business from a satisfied client.
HERE, HERE!!
When a buyer or seller asks me for a referral of a lender, home inspector, termite inspector, radon inspector, agent for something out of my business model, etc., etc. they will get just that.
They will be referred to the best of the best of which I have any experience. That means the loan officers with whom we've closed loans, the home inspector, termite, radon, etc. inspectors that do my own home or would do my own home if I needed the service.
GEEZ! Handing someone three cards is just one step above saying "try the yellow pages".
Absolutely right Paul! How can a Real Estate professional call themselves that when their service starts and stops with showing houses and doing an offer....? There is so much more that the client needs and deserves. Good post.
And a second "HERE, HERE!!"!!
I go through the ENTIRE process with my clients...start to finish. Does that put me at risk?? Sure. However, I have satisfied clients AND I receive their referrals.
Nice post. Having a good team in place helps everyone.
Good post against the risk adverse. 'Big boy pants' LOL.
Hi Paul ~ Absolutely. I couldn't agree more. I'm not a transaction clerk. You ask me for an opinion, I will give it based on my expertise... I don't dodge the question or do the three card trick. How is that helpful anyway? As Lenn points out, that's just one step above the yellow pages.
I understand that we live in a litigious society, but that doesn't mean we should tip toe around clients watching our back every step of the way. We're hired for our knowledge and experience not just to open doors and write contracts!
Great post. Congrats on the well-deserved feature.
Denise
Risk avoidance, sad to say, is a very popular trend these days. But I, like you, prefer the big boy pants. Great post!
I love to refer my clients to the most competent inspectors, engineers, contractors, etc. I always like to give them 4 of my favorites along with information about where they can find other service providers. This seems to be a game winning plan and everyone comes out on top. Love the post and I look forward to reading more of your blogs. Keep up the good work.
Best regards, Dave
www.WestallRealEstate.com
Well, I'm not ashamed to say I give three. The first I tell the client is the one I would use if I were buying or selling. The second one I give is someone who has earned my trust and if the other person were not available. And, the third may be as good as the first one but is not exactly my cup of tea.
None of them put any money in my pocket and the client is not required to use any of them. If that is being wishy washy then so be it. I have seen many an agent direct who is going to be used and some vendors flock to them to get in their good graces. I think it is a good rule to offer more than one lawyer, inspector, insurance, or, other professional.
If it were I that was buying a house, that's how I would want it done for me.
I agree with you. I never shy away from giving referrals. If you stand on the sidelines and something goes wrong are you really any less likely to get dragged into a lawsuit? I believe that by sending them to top professionals, you are more likely to have a delighted client and more likely to go to closing.
I have made a business decision the giving referrals to vendors I trust is an acceptable risk.
There is never a requirement to use anyone I recommend, Gregory. That would just be plain silly. With contractors, I do much as you mention. "Here's the cheap painter. Here's the good painter," kind of thing. When it comes to inspectors, lenders, etc, however, I'd much rather provide the contact info for only the most trusted resource. By all means, clients can seek other referrals, but I won't reach into a hat for a name.
Paul, I agree with everyone that I will recommend whoever I think will do the best job for the client.
Paul, when I read the first half of your blog I was thinking, "here we go again"! I am glad that I read the second half. I get tired of agents who have no intentinal fortitude and always give the list of three. I don't happen to know 3 good lenders (I know 2), 3 good home inspectors (I know 1), 3 good termite inspectors (I know 2).....
I completely agree. I refer those whom I trust to do the best job for my client. Whether or not my client chooses them is my client's decision, but if they ask me for a recommendation, they get my recommendation. "Pick a card, any card" seems lazy at best and irresponsible at worst. Am I putting myself at risk? Perhaps...but I put myself at risk every time I cross the street, too. If I want to get somewhere, I'm going to have to take that chance.
I completely agree with your post. It is our responsibility to represent our people fully to the best of our ability. Anything short of that errors and omissions takes over and you know what that means.
Amen! You only have to sit through one incompetent inspection that takes four hours for a 1000 sq. ft. house (true story) to ever sit idly by when your client wants to pick an inspector by price off the internet! Lesson learned. Great post - I just love your writing!
So are you sayting that those cookies that the title company drops off at the office aren't working?
Are we talking walnut chocolate chip, Lisa?
Interesting topic, Paul! And, lots of great comments by AR members!
I've taught risk reduction classes for 20+ years, and this subject comes up all the time. As a lawyer, I refer clients to qualified professionals every day, and it's never come back to bite me. I do like the idea of a short list, since it gives you the opportunity to put a disclaimer at the bottom: "While we believe these folks to be reputable and competent, we cannot be responsible for the work of others over whom we have no control. Talk to several of them and satisfy yourself as to which one best meets your needs."
Home inspectors are by far the most important referral you can make, since the condition of the property is the No. 1 source of claims and complaints against licensees. Recommend only those who are properly licensed and who have E & O insurance! Yes, home inspectors can buy E&O. Put a copy of their agency's license page and the declarations page of their policy in a folder marked "Recommended Home Inspectors." If there's a problem with the house later, THEY and their insurance carrier should be the "first responder," not you! Many agents have wound up paying the freight for a negligent inspection because "Mom & Pop Inspection Service" had no insurance and no assets. And if there is a claim that you were negligent in making the referral, you have your file, and who goes to the trouble of verifying that stuff? You are far above the standard of care by checking on the bona fides of those whom you recommend.
One more thought before I duck out the door: to an extent, risk deflection is your job, and here's why. If you think about it, everything you do to protect yourself from liability (like checking credentials) automatically means you are providing a higher quality of professional service to your clients! Risk reduction and professionalism are yin and yang.
Interesting perspective with valid points, Bob. To a degree, I suppose my central thrust is risk reduction through superior service rather than conscious abstinence. In considering how to best serve my clients, I find the mitigation of risk essentially handles itself. In that regard, I would say that we share a similar philosophy.
Excellent, Paul, I do the same. That is part of the value of working with me - Iit has never been an issue nor has a referral NOT done the kind of job I expect them to based on my past experience.
Jeff
Thanks, Jeff. I actually have had the occasional referral not go quite as well as hoped, but I've used such rare occasions to reassess my database. I've had to recycle inspectors and lenders a couple of times when I realized improvements could be made. Not that the service provided was bad by any stretch, just not quite up to my obscenely high expectations.
I always give a list of recommended providers, and ONLY those firms that have proved themselves to be professional and of the highest quality get on the list.
There are questionable vendors, or those who have NOT provided good service to our clients, who we will never put on the list.
Paul,
I don't vote present when it comes to recommending service providers. There are plenty of ways to get in trouble during a transaction, but making a referral is pretty far down on the list.
Rich
You would like me, I take the bull by the horns. "When would a good time be for a lender to call you?"
They never call and I hate it when people think we CANNOT just refer one person. My nose is clean (no kickbacks) and I have complete faith that the person can take care of them with the best service rates and fees.
AMEN!
Last summer I attended a 7 hour inspection on a huge house with one of the best inspectors I know, and although we had our work cut out for us after that, it was well worth it. Knowledge is power,especially when it is your knowledge of which vendors are the best of the best. I don't, however, give just one name. Guess some "training" is hard to let go of:)
Evening Paul, Interesting topic. Our office policay is that we must provide a minimum of two sources or none at all.
I constantly refer to people both to assist my clients with the purchase and sale of their home as well as in other aspects of their lives. I think it's part of the service.
I agree that many agents are like this, but I am not. I recommend people I trust -- sometimes more than one for a particular area. I always tell them they have the right to choose whoever they want, but I trust these people ...
Hear! Hear! I have the same philosophy and it has served me well for over 13 years now. I am not afraid to openly recommend someone that I know will do a good job, and I've never had a mediation or threat of a lawsuit. It's part of our job to guide our clients in an appropriate way, and to provide real service. Period.
You have a great game plan Paul. You are so right about the football analogy having coached defenses for 17 years in high school. The best defense IS A GOOD OFFENSE. It is hard for the other team to score when your offense is eating up the clock with seven or eight minute drives every possession! I would rather be PROACTIVE than REACTIVE!
I say "be the source of the source, don't be the source".
Good Post!
I would respecfully argue that you can have your cake and eat it too by handing two or three of the best that you know of and stating so. "Here are a couple of the best that I am aware of in our area."
You didn't steer, you helped.
Fantastic post Paul. I agree with you 100%. If you are in any position to need the help of someone else to come through to produce a result, in this case a closing-you should definitely do everything you can to get "the ball" into that persons hands. Thanks for your comment about "preferred vendors as well", I absolutely agree.
This market has provided the best opportunity to upgrade all of your vendors to those that provide real value-not just do their jobs. Sounds like you have a great team, congratulations. Anything changes, I'm right down the road. By the way....I see you are in Phoenix, like me-Check out www.Smurcle.com I think you will find it to be unique and a true value add for your business. Good Luck.
I am with you. I put on MY BIG GIRL PANTIES AND GO TO WORK everyday. I know what I know, and when I don't I say so.
RE: Home Inspectors...I have never had anything come back to bite me, but the only bad experience I am aware of a client having happened when they selected their own without any input from me. And I must say for the record, that incident probably had nothing to do with the inspection itself. It was a problem that likely would not have been caught by any home inspector. But, I will say that I breathed a sigh of relief. You never know!
AMEN!!! So many Realtors are such wimps and wouldn't know a pair of BIG BOY PANTS, if it bit them on the tail!! This is an awesome blog! Unfortuantley MOST Realotrs are BIG WIMPS and hide behind their "in house" lenders or "3 cards" excuse! I appreciate you deciding to take control of your business, by using the best resources you know!! That is how I judge a real PRO that wants to do the best for their customers! 99% of the Activerain post are such LIES... it is nice to hear an HONEST, DIRECT post! Stop with the kickbacks and the in-house folks, just because you get some money, Realtors! Don't compromise, take control of your business, use the best you know, and make MORE MONEY! Keep posting Paul!!
When you've been in the business for a while, you get to know a lot of people. I know several in different real estate related fields and never hesitate to refer them. We're in the relationship business. I'm not going to send you to anyone I haven't worked with, respect, and/or know... Nice post Paul... thanks.
Wait a minute...I thought I clicked on the Vegas Dudes pictures of New York...
Oh well, as long as I am here!
Our company maintains a large "vendor list" that all of the agents keep updated including any note of poor service (which usually means immediately being dropped) and we have never had a problem. I also have lists of my own with names of folks I've worked with for years but I also make the effort to answer each request with a LIST so that the person needing service can call and interview several and hopefully find someone who can do a good job.
I am particularly involved in the lists of construction trades. Texas does not really have enough licensing and no longer has the extensive Union apprenticeship programs that provided so much quality trade education in the past. Having spent 16 years in the construction business, I've seen more damage done by morons who just "beat it to fit & paint it to match" than you can imagine so in our state it is always a good idea to get references from the start! I've got my Big-Boy pants on but since it's Saturday I am going commando ;-P
Excellent post Paul. Having a team of trusted experts is just another area that allows you to add value to your service in any transaction. This helps to make each of us stand out so that our current clients become repeat clients and reliable referral sources. In regard to risk analysis..."you can't make an omelet unless you break a few eggs".
I should clarify that providing more than one name does not necessarily constitute a shirking of duties by any means. Many commenters here have mentioned that they provide more than one option, but I think the critical component to such referral to multiple sources is the commentary that attends it. Nothing wrong with providing two names and saying one is your go-to guy and the other is a capable contingency plan. In cases where you have no trusted resource, gathering more than one name from associates to pass along is not a bad idea. The central lament is the practice of simply providing names with no guidance, or stepping back from the critical junctures of the transaction all together.
Unfortunately, I am not going to be able to respond to everyone individually, but thanks to all who took the time to read and comment.
And Russell, I thought I clinked on that post, too. ;)
As a former REALTOR for 25 years and as a lender for 7 years and a State Certified RE Instructor, I couldn't agree more with the farce of 3. Courts have held that the agent is not liable for recommendations if no kickbacks are involved. Furthermore, the 3 cards remind me of when my wife went to a Doctor at a large national clinic, (think of the opposite of mustard) and the doctor said, "There are Six types of Pills I can prescribe, here they are, tell me which one you want me to prescribe" We went to the doctor to get her BEST recommendation based on our situation, not to have her reduce her "potential" liability.
Same with RE agents. When someone asks for a recommendation they are looking for that expert opinion based on thier situation, personalnatilties etc. While I believe in having more than one relationship, I only recommend one at a time!
Dude, I love your posts. They are filled with so many metaphors and it creates so many images in my head as I am reading.
Passing out three cards is the sign of someone who doesn't trust their referral. Building relationships takes time and most don't want to do it. The easiest thing, pass out three cards for someone who seems good. The professionals make it look easy.... nothing more to say!
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