Do What You Know

Welcome back to On the House. We took a brief hiatus for the Thanksgiving holiday but are now back in business. We hope that everyone had a great extended weekend and that you were able to spend time with family and friends.

I had originally planned to chat about structured sales until I attended a seminar on bankruptcy. By the way, the structured sale is a fascinating vehicle and something about which everyone should have some understanding. However, there was something about the bankruptcy seminar that was very unsettling and, consequently, the inspiration for the topic today. What follows is directed toward my fellow realtors but is applicable for anyone that is in a position of trust.

First of all, the subject matter itself was daunting. We’ve all heard of the different types of filings that exist but do we really understand them? Do we know the difference between Chapter 7, 11, 12 (yes, there’s a Chapter 12) and 13 bankruptcies? Which one is a liquidation versus a reorganization? Which one is a business or an individual reorganization? Now, the answers are discernible but are they a part of our daily vocabulary? They are not.

It is at this point in the seminar that I became uneasy. The room was full of real estate professionals asking how to best advise their clients about the structure and disposition of a bankruptcy. Even more disquieting were the responses from the speaker; a lawyer who had been practicing law for nearly 30 years. There was seldom a yes or no answer. Most answers were conditional. Most answers had to be qualified. I was left with the impression that every filing was unique enough to rule out any definitive answers.

The only correct posture here for the real estate professional is to give no advice at all. In our challenged market we’re approached daily with the advice that we have to bring more value to the table if we’re going to be viable. We’re told that our survival depends on it. At the same time, our risk management experts tell us to avoid such behavior. We exist in a litigious environment walking a fine line between service and exposure.

The risk management people are right. When asked for advice about anything relating to legal or tax questions the only correct and honest position to take is to tell your client to seek that advice from a licensed professional in that field. I get approached all the time by friends and clients for advice on everything from how to manage an estate to where to make prudent and profitable investments. That last one always makes me smile. I mean, you’re talking to the guy who invested in Gardenburger ™ when it was at 18 ¾.

The final word here is to do what you know. Provide that market analysis. Direct your client to an attorney or CPA. Be available to assist in the marketing of the home if mandated by the other professionals. Don’t give legal advice. Don’t step out of your area of expertise. It’s entirely possible that you are putting yourself in danger and damaging your client as well. There is no upside here.

Once again, thanks for reading this post. I welcome your input on this or any other subject. I can be reached at gary@vppihomes.com or http://www.vppihomes.com

As always, this information has been… On the House.