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Today I want to share with you with some real-life stories that prove that discounted service providers sometimes come with some VERY expensive hidden costs.
Insurance
This is the story of a townhouse owner who came home late one night to discover his home on fire. He literally lost everything (and so did his two neighbours). Luckily he had insurance, right?
It turns out, he cheaped out, and never considered the fact that he also owned appliances, toilets, upgraded floors, the light fixtures and more…and he had only insured his “personal belongings”. His discount insurance broker never thought to counsel him on that.
The best insurance is often the most expensive, and naturally, the best case scenario is that you don’t need or use that great coverage at all! Talk to an experienced Insurance broker, and they’ll tell you all kinds of real life stories about good and bad decisions.
Mortgage Broker
In Toronto’s crazy-fast competitive market for houses, last minute decisions are the norm.
Picture this: There’s a bidding war tonight on a house our Buyers love. Earlier in the day, our clients ask the mortgage rep at their bank to re-work their financials to make sure they can afford how much they want to bid. Offers are at 7 pm that night. At 5 pm, the mortgage rep (who works in a branch) says: “Well, we ran out of time, so I am headed home now. I’ll have to finish up your approval tomorrow morning… good luck!” …leaving the Buyers facing the decision of whether or not to offer on a $2.5M house without knowing if the bank will give them a mortgage.
When choosing a mortgage lender, choose someone with some skin in the game if you want them to go the extra mile. Mortgage brokers and commissioned salespeople at the Big Banks are always your best bet: they’ll know what needs to be done and will be willing to do whatever’s necessary to make you happy.
Real Estate Lawyers
A real estate transaction is a pretty straightforward job for the lawyers, right? If so, why the heck shouldn’t I hire that guy who dropped a flyer on my door—he’s got one lawyer and 200 clerks churning deals out cheap. And I can save $200!
Well, yeah, a real estate deal is super easy…until it isn’t. Many transactions have some weirdness, and sometimes they get downright messy. Buyers can’t get financing at the last minute; the Sellers leave the house in complete disarray; the appliances are broken, and the hardwood floors are scratched. These are the times you don’t want Clerk #164 working on the sale or purchase of your most valuable asset. The price difference between the cheapest and most expensive real estate lawyer is probably only a few hundred bucks. Think of a great real estate lawyer as the cheapest insurance you ever bought.
Real estate: Of course, my favourite example.
Picture it: Our clients–new buyers–arrive at their new home in a moving van at 6 pm on the day of closing. The Sellers? Still in the early stages of moving. An hour later, the Sellers’ furniture is strewn all over the lawn. Messy, right? We’re scrambling to find solutions, sending over the 1-800-Got-Junk guys, looking for storage solutions…but wait, it’s the Sellers who need the help most. Where was the other agent? “Well if I got paid more than $1,000 on this sale, maybe I’d try to help, but I just can’t afford to put any more time into this deal.”
Don’t get excited—that was the first time I’d ever heard of someone doing a sale for that kind of price too (and it underscores the adage that there will always be someone who will do “it” cheaper, no matter what it is)…but you can see where he is coming from in a way. Doing your best shouldn’t be tied to how much money you make, and there isn’t an exact correlation between how good someone is at their job and what they earn compared to their peers. But the free market certainly tries to push things that way. If you’re good at your job, you can usually ask for more. If you can’t compete on quality, you’re often left with competing on price. And the best will want to keep the reputations they’ve earned. So who’s most likely to bust their a$$ to help when things go sideways? Whether or not he helps move that furniture out, that realtor’s reputation as the cheapest realtor ever is intact. Buying or a selling home is a huge, life-changing transaction. Just last month, we watched an agent give away $30,000 of their client’s money by not doing their job as well as they should have.
The decisions we make when buying and selling a home are way, way, way bigger than haggling over .5% of commission, or an extra $200 in legal fees, or $20 a month in insurance premiums. Think big picture.
And if you hire Mr. $1000, don’t complain when $%^ goes sideways, and he’s nowhere to be found.
