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Should lawyers own estate agency companies or are independent agencies better? (A personal perspective) – Featured Blog

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Today’s posts from our featured Port Elizabeth Blogger:

Should lawyers own estate agency companies or are independent agencies better? (A personal perspective) by The Port Elizabeth Property Blog:

Do you think it is better to appoint an estate agent who is at an estate agency owned or controlled by lawyers or is it better to appoint a truly independent estate agency?

In my earlier years, I qualified as both a principal estate agent and conveyancer almost at the same time. In retrospect I maybe naively, thought that by doing both I could sell and transfer properties; an ideal sounding theory. 

When the reality hit the plan, the outcome was very, very different. Firstly, other agents who supported my legal practice no longer sent me transfers, because I was now a competitor. 

Secondly, the focus became a problem as time and resources were being spread between two very divergent types of businesses. I also have observed that estate agencies owned or controlled by lawyers often battle in the face of competition from independents, some succeed, but not to the degree they could; in my humble personal opinion.

In this article, I am rather going to look at this dilemma from the seller’s perspective and use observations I have made in the industry, over the past 14 years, where I operated, mostly as a principal estate agent. Please note that these are purely personal observations:


1. SEPARATION OF PROFESSIONS 

There is a very important principle which lies behind the rationale of the separation of functions in government. The separation and independence brings about structural checks, balances and safeguards; which protect all parties, mainly the consumer. 

This separation also prevents what I refer to as “agent capture”. This is where the estate agent is directly or indirectly compelled to use a certain conveyancer, because of the fact that he or she is the estate agent’s boss. 

Although it may never happen, the doubt is always present that where the estate agent works for the lawyer, it may lead to the lawyer shielding the estate agent, alternatively confusing the loyalty which should be solely owed to the seller. What is concerning, is the knawing doubt which will always tend to infuse the relationship with latent distrust, which erupts when things don’t go according to plan. 

It is often lost on lawyers that the same rationale applies to lawyers controlling estate agencies, as what is applied when during the dialogue around opening conveyancing to third parties, like the banks. Here heated debate occurred around the absolute importance of attorneys retaining their independence and how important it is to clients and the trust of society. It is submitted that with all respect, the exact same applies to lawyers controlling or owning estate agencies.

2. THE CONCEPT OF THE “ONE STOP SHOP”

This concept has frequently appeared in many forms and guises and once again superficially seems to make a lot of sense. But the most difficult element is fusing two completely different professions. 

The complete lack of operational knowledge, by lawyers, with regard to the actual practice of a real estate brokerage, is a fatal flaw in the system, as is the thinking that the one profession is superior to the other. 

It can be said that nothing happens, unless something is sold by someone. Without the sale of the property, the bankers, the lawyers, the services (like electricians etc) all have no work; it all starts with the sale. This is why traditionally, the sales professionals are paid so much ,relative to others in an organisation.


3. SPECIALIST THINKING / MINDSET

Real estate agents think decidedly differently to lawyers, that is why they chose the particular profession. They process the world differently and seem almost immune to rejection. 

There exists among some of my ex-legal colleagues an attitude that lawyers are more than competent to do the work of an estate agent. In some aspects, even a leyperson could eventually sell a property at a price, but specialist skills become vital, in a downward market or if you wish to obtain an optimal outcome. That is when skill, experience, and knowledge become critical. 

It is this thinking which often tempts not only lawyers but also professions like chartered accountants and the like, to give advice relating to the sale and marketing, of property, which is outside their sphere of knowledge; which has in my experience often led to client’s following their advice instead of the agent’s advice. Despite the best of intentions, the outsider is not aware of the context and thus the advice possibly could lead to the sale being delayed, being concluded on less favourable terms, or the deal being lost, altogether. 

Just to reiterate, this is advice on issues which are well within the scope of professional estate agents like valuations or marketing strategies. In financial services, only FAIS accredited persons may give professional advice, the same rationale should be followed in real estate services, for the protection of the public, for the same reasons.


4.  RISK

Property is very technical, sometimes beyond what many realise. Although a professional can make sometimes the most complex of tasks seem effortless, does not diminish their contribution or the value to the client. 

In the case of estate agents, it is often argued that lawyers can better protect the consumer if the estate agent works for the lawyer. The reality, as a rule and the because of the very nature of the work; estate agents operate out of the office and effectively outiside of the supervision of the office.

This means that the client has no more security than what he had with an independent professional estate agent. There is, however, a difference when the agent works for the lawyer; in which case there is essentially one entity and one professional body; while in the case of separation; there are two responsible entities and two opportunities to reduce risk and increase the protection.

5. CHOICE

If an agency and its agents, are controlled by a lawyer, the pressure may be intense on the agents to influence the seller to select the owner’s firm to attend to the transfer. 

If the lawyer is truly the seller’s choice, or if the lawyer has the appropriate experience in dealing with a specific aspect of the transaction, or of the lawyer has local offices etc, that would be ideal. 

But in my experience, if an estate agent is compelled to use one conveyancer, irrespective of the circumstances, the client’s interests or the level of service may very well be the victim.

6. COMPETITION

This is a key concern for many estate agents is that you are getting a professional and efficient service for your clients. 

If attorneys know that the estate agent could move their work elsewhere, there is a natural tendency to put in the extra effort, knowing that they may lose future work if they are slower than the competition or ineffective. 

On the other side, If an estate agent has no choice, there is a very definite possibility that the work from that agent is taken for granted. This may result in sub-par performance for the client. 

Competition is great because it keeps professionals on their toes, what if there is no competition?

CONCLUSION
There are other aspects, but in my experience, the above have been the most prominent reasons, which have made this ownership option to be plagued by concerns and doubts.
When I co-founded Bold Realty, I applied to have my admission as: attorney, notary and conveyancer; moved to the non-practising roll and I closed my law firm, which had operated successfully for over fourteen years. 

If I learnt one thing while studying towards the MBA. it was the importance of focussing of resources and strategy. The other aspect is of course mindset, which colours the way you perceive  snf interact with the world. 

I am a real estate professional, who just happens to be admitted lawyer, although non-practising. Do I leverage that knowledge and skill; of course I do, but now we multiply that advantage by using the top industry leaders in the legal field, who get appointed on a case by case basis.

In my experience, clients derive peace of mind, knowing they are being looked after. 

We have an exceptional relationship with our panel of professionals; but there is always the added peace of mind of knowing that there is not undue influence and that everything happens as it must. But ultimately, like with all things in life, its about personal choice and accepting responsibility for our part in choosing what is best for us.


Clinton Begley (PPRE MPRE CEA B.PROC (NMMU)) is the co-founder, Principal/Director at BOLD REALTY, in Port Elizabeth, South Africa. In addition, to his passion for people and real estate, he is also an experienced trainer, coach, and mentor. He holds a B.Proc degree through the Nelson Mandela Metropolitan University and is a non-practising Attorney, Notary, and Conveyancer (with over a decade of experience). His legal and real estate experience is augmented by studies towards an MBA degree through the Nelson Mandela Metropolitan University Business School, which he is scheduled to complete soon. This article reflects the personal opinion of the author only, it is NOT intended as legal advice nor may any reliance be placed upon it. The article is purely for information purposes and you are advised to consult an expert before making any decision.

Read more here: The Port Elizabeth Property Blog

The Right Professional for the Job by The Port Elizabeth Property Blog:

Having practised for over a decade as an attorney and an estate agent, I have come across my fair share of professionals who, often with the best intentions, exceed their field of expertise in giving advice.

As an estate agent, you are a full time professional practitioner in the field of property valuation and the brokerage of property. It often happens that when you are in the profession long enough, you come across, what I call “The Well intentioned Adviser”. They are normally in a position of trust and they have in the past performed superbly in their field, which has cemented their position, in the mind of the client.

Having a trusted adviser is a wonderful thing, it leverages your capabilities, it provides peace of mind and can help you achieve a better outcome.

But what happens when that adviser so drifts outside the safe port of their own field of practise. An example of this may be an electrician, who has been on a building site with builders for years and has seen builders working. When he is asked about a building problem, he or she may from need to no loose face, maybe a bit of arrogance; but mostly purely from a desire to help.Nobody can doubt the intention, but is advice is now in a field in which his experience is insubstantial at best and sketchy at worst. Can they really provide the best advice? Would it not be better to refer a building expert, which would not detract from his or her position at all?

In property we have many such persons who advise people on property such as doctors, engineers, chartered accountants and the like, all giving their advice on fields outside their field of expert knowledge. Yes, they may know something, but is it enough, be to the right advice?

Its great to have professional advisers, but make sure they are experts in the required field.

Clinton Begley (PPRE MPRE CEA B.PROC (NMMU)) is the Principal/Director at BOLD REALTY, in Port Elizabeth, South Africa. In addition to his passion for real estate he is also an experienced trainer, coach and mentor. He holds a B.Proc degree through the Nelson Mandela Metropolitan University and is a non-practising Attorney, Notary and Conveyancer. His legal and real estate experience is augmented by studies towards a MBA degree through the Nelson Mandela Metropolitan University Business School, which he is scheduled to complete soon. This article reflects the personal opinion of the author only, it is NOT intended as legal advice nor may any reliance be placed upon it. The article is purely for information purposes and you are advised to consult an expert before making any decision. The author nor any other person or entity may be held liable for damages of whatsoever nature from whatsoever cause.

Read more here: The Port Elizabeth Property Blog

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