Good advice is worth its weight in gold.
“John” wanted to buy a house on Long Island. He found the perfect house at the right price. But his family had very specific needs. His current landlord demanded he be out of his rental by the end of the summer and he needed to enroll his kids in the new school district. Starting the school year in another district, then transferring his children again was not an acceptable option.
John’s Realtors recommended a number of very good Real Estate Attorneys. But John’s employer offered a benefits package that included “free” legal services from their law firm. John chose the free attorney rather than what he perceived as an unnecessary expense.
It was quickly apparent to all parties that John’s attorney was a general practitioner and not a real estate attorney. Negotiations were difficult, time consuming, and John’s attorney was not motivated to return phone calls. I proposed solutions that would be a WIN-WIN for both buyer and seller. Although John was open to my ideas, they never gained traction since his attorney didn’t understand, didn’t care, or was intimidated. (I’m always bewildered when a professional is closed-minded to new ideas. Over my 20 year career, I’ve learned many wonderful things from attorneys, realtors, CPAs, financial planners, and even my own clients! Why wouldn’t everyone be open to at least listening?)
In the end, to everyone’s disappointment, the deal died. The new school year was upon us and John was forced into a rental for another year. Purchasing a home would have to wait until next summer.
John realized his mistake. He viewed a real estate attorney as an expense instead of an investment. Though he avoided investing about $1,000 in a competent and qualified real estate attorney, it cost him in the long run:
- The loss of about $25,000 in mortgage and real estate deductions (and thus, a higher tax bill) over the next 12 months.
- Higher costs to borrow money. Interest rates today are at record lows. Twelve months from now, they’ll likely be much higher. And even a one percent increase in rates will add at least $250 to his monthly payments, if not more.
- The expense of moving twice (this summer and again next summer).
When hiring a professional, whether they are a Realtor, Mortgage Planner, Attorney, CPA, Financial Planner, Physician, Plumber, Electrician, etc., be sure to do your homework and choose wisely. In the short run, the “cheaper” choice might seem attractive. But in the long run, your unanticipated costs might prove severe.
Warren Goldberg is a Certified Mortgage Planning Specialist and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.