Several years ago, Landlord Bob drafted a contract to lease one of two adjoining parcels he owned to Tom Tenant. Bob decided to “save some money” by not hiring an attorney to draft or review a vital contract provision.
Fast forward to today when Bob wants to sell his two adjoining parcels to a single buyer. He engaged an excellent broker who is a friend of mine. The broker reviewed the lease contract and explained how the sloppily worded clause could impede the sale. He’s not an attorney, but he knows vague or ambiguous contract language usually works against the person who drafted the contract.
The broker suggested that Bob draw a new lease with the tenant before trying to sell the two parcels. Bob was uncomfortable. Maybe he was afraid of confrontation. Perhaps he didn’t like admitting he made a mistake. Maybe he was trying to save some money again.
Whatever the reason, Bob didn’t change the contract and told my friend the excellent broker to proceed with the sale. A month later Tom Tenant sent Bob an email threatening legal action.
We don’t know how this will end, but it will be far worse than it should have been. Bob could have spent the money to have an attorney draft or review the critical provision. That would have headed off the problems he has now.
Tom Tenant might have decided not to sign the lease, and Bob could have leased the property to someone else. Or, Tom would have signed the lease, and a well-drawn contract would protect Bob.
Because he chose the risky course to “save some money,” Bob has extra trouble, has delayed his sale, may have to pay more money to deal with the legal action, and it will be difficult to sell his two adjoining properties to a single buyer.
Lessons
There are prudent ways to save money and there are risky ways. The risky ways include
Not hiring an attorney to draft important documents
Not hiring a professional building inspector to inspect a property you’re considering.
How do you choose a prudent course? A great broker can help you.
In Building Legacy Wealth, I suggest that you team up with a great broker. He or she knows many ways to help you seize opportunities, build wealth, and stay out of trouble.
An excellent broker can identify a situation when you need specialized advice. Then, he or she will use knowledge of the marketplace to point you to the best specialized advisor. An excellent broker who knows you, the market, and your values and goals is a key to profitable real estate investing.