There is value in a diverse new client funnel. Fundamental changes in technology have created new opportunities for lawyers. There may be no better example than real estate. It starts with FSBO – For Sale by Owner.
In Seattle today, it’s a great time to sell a home. A home – any home, in any condition – can elicit an “insane” bidding war. In some neighborhoods, it seems writing “For Sale” in chalk on the front door could attract a few fair-market offers.
So why do sellers still routinely pay 6% to sell a home? In this historic seller’s market, surely sellers can save a point or two – or way more on real estate broker commissions. Those commissions average about $40,000 in Seattle. That’s an opportunity for massive savings. A year of college, anyone?
Homeowners can market the home themselves
Real estate brokers provide two types of professional services to home sellers: marketing services to attract buyers and legal services to negotiate a contract. Since buyers far outnumber sellers these days, any reasonably sophisticated home-owning adult can handle the marketing. Because of the transaction’s nature and magnitude, though, the legal services are a different matter.
Legal counsel is prudent
Selling real property is a uniquely legal transaction. The obligations and potential liability of the seller are rooted in hundreds of years of common law. They also flow from statute. The vast majority of sellers must disclose the known condition of the home in detail.
Furthermore, the stakes are high. The typical home in Seattle sells for $735,000. For most, it is the largest financial transaction of their lives so far. It’s a big deal that requires incurring legal fees – whether paid to an attorney or a real estate broker.
A lawyer provides huge value
Since Cultum v. Heritage House Realtors, 103 Wn.2d 623 (1985), brokers have been able to engage in the limited practice of law (by filling in blanks on preprinted forms drafted by lawyers). Back in the ‘80s, the court noted, brokers could much more efficiently provide the needed legal services.
Today, the internet allows sellers to effectively market the home themselves. Meanwhile, increased competition in the legal field, combined with housing values that have far outstripped inflation, mean lawyers are no longer the expensive option. They are, in fact, much less expensive than real estate agents.
Needless to say, they also provide superior legal services. By hiring a lawyer, a seller will have a full and complete understanding of the risks and potential liabilities associated with selling real estate. Those risks can be addressed and reduced by inserting unique terms into the contract (which is beyond an agent’s authority to practice law).
Buyers make great clients
All of the same logic applies, of course, to home buyers. These days, more buyers use the internet than an agent to find their home; so buyers don’t need assistance on the “shopping” end of the real estate broker service spectrum either.
Buyers do, however, need legal services. And they, too, will benefit from having legal counsel to provide the legal services (e.g., only an attorney is qualified to interpret a title report).
Tools are available
Expanding a law practice to include residential real estate transactions is easy. Every broker is a member of the Northwest Multiple Listing Service (NWMLS). So the service’s forms are the de facto and near-universal standard. When representing sellers, an attorney is more than qualified to counsel a client about an offer on NWMLS forms. And those may be the only forms you ever see.
The forms are for sale to attorneys. A lawyer can easily draft an offer on behalf of a buyer that will be received like any other. Important in this market. The best part? Knocking 3% (the unpaid commission to the buyer’s agent) off the price.
When an attorney provides legal services to home sellers and buyers, they give consumers an alternative– a chance to save an enormous amount of money and superior service in the process. And the attorney gets a new stream of business.