Consulting Helps Couple Avoid "Money Pit"
by Don Dunning, ABR, CRB, CRS
DRE Lic. #00768985
Originally appeared in Hills Publications, May 11, 2007 and
ANG Newspapers (Oakland Tribune, Alameda Times Star, et al), April 29, 2007

After losing out in multiple offers on two houses, "Sam" and "Barb," a local couple, heard about a For Sale By Owner (FSBO). The sellers refused to pay a real estate commission and their Realtor told these buyers they would have to go it alone. Apparently, the agent did not know about Buyer-Broker agreements.

Sam and Barb considered hiring an attorney to draft the contract. Before doing so, however, Sam's co-worker, one of my past clients, referred them to me for my by-the-hour, consulting help. As it turned out, for a nominal amount, Sam and Barb avoided spending a premium for a home that offered little more than a laundry list of problems.

Is real estate by-the-hour common?

Almost ten years after my first article on this topic, real estate hourly consultants are still rarer than the Vancouver Island marmot. Actually, the 29 remaining marmots far exceed the number of Realtors I know who do hourly consulting on a regular basis and are clear on the differences between being an agent and a consultant.

Meeting at the office

Before we met, Sam and Barb had already agreed on a price with the sellers. Their offer was $25,000 more than the asking price. When I asked why they had offered so much higher, considering there were no other buyers in the mix, the couple told me that losing out in previous attempts had shaped this latest bid.

First, I carefully explained what I could and could not do as a consultant, and had them sign a consulting agreement. They wanted me to take care of the purchase agreement and disclosure paperwork and give them insight about this particular property. At that point, they had no reports on the house, although they mentioned that the sellers had ordered a structural pest control (termite) report. I recommended they hold off writing a contract until after I had reviewed the termite report with them. They agreed.

Researching the property

While waiting for the report, I searched the MLS for tax information and comparable sales. In addition, I drove by to get a sense of the house and those around it. I had advised Sam and Barb to wait until after we received the termite report to have me look inside. This would save them on my consultation fees if the report showed too many issues.

Reviewing the report

About a week later, Sam faxed the termite report to me. He was excited as the sellers had agreed to pay for Section One work. My concern, however, was that the sellers were planning to hire their own workmen, not the company that did the report. I explained two main problems: 1) there was a good chance the sellers would hire the cheapest, not necessarily the best, people to do the job; and, 2) work done by another company would not be warranted by the original inspector.

The issues: 1) four items contained disclaimers indicating a supplemental report with additional findings and costs would be provided if more damage was found. This meant it was not a complete report and raised the question of what would happen if the sellers' workmen did not professionally and competently handle all the pest control problems; 2) water stains, indicating possible roof leaks; 3) several notations that the "concrete foundation is porous," meant an engineer was needed to assess the adequacy of the foundation; and 4) active subterranean termite infestation. This suggested that the infestation was ongoing and could be causing much greater damage than reflected in the report.

I strongly recommended that the buyers get an oral agreement from the sellers that they would hire and pay the licensed termite company to complete any work presently known or discovered during repairs. My reasoning was that it made sense to find out in advance if the sellers were willing to pay for this. If not, the buyers would save consultation costs on my doing the paperwork and the expense of a general home and engineer's inspection.

The result

The sellers refused to have the termite company do the work and the buyers opted not to write the contract. At a minimum, they saved money and aggravation by not having to hire their own inspectors. In terms of the worst-case scenario, it is quite possible that Sam and Barb could have bought this house without understanding all its serious, hidden, and expensive problems. No one knows how many tens of thousands of dollars in repairs might have been necessary in the future.

Final thoughts

Although a bit disappointed that this home did not work for them, Sam and Barb were relieved and grateful to have been able to get expert advice on an hourly basis. In all, they were billed for less than five hours. They could have hired an attorney, but few lawyers know home values and have an in-depth knowledge about property condition and the intricacies of termite, general home inspection and engineering reports.

In a world of increasing complexity, the simple idea of paying a real estate professional for only the time you use him or her, when dealing with unlisted properties, is logical and appealing. Unfortunately, finding the right person to help you may be your biggest challenge.

Related Articles: Consultant or Agent?Consulting Saves Buyer's BaconHourly consulting: Great idea whose time has yet to comeHourly real estate consultants: Still hard to findBerkeley seller applauds hourly real estate consulting

Don Dunning has been a full-time, licensed real estate agent since 1979 and a broker since 1982 and is past president of the Oakland Association of Realtors. He provides sales and hourly listing or consulting services with Wells & Bennett Realtors in Oakland and is an expert witness in real estate matters. Call him at (510) 485-7239, or e-mail him at , to put his knowledge and experience to work for you.


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