The Rule of Three

"I can't help you. You definitely need to see a Board certified specialist."

"What kind, doctor," I whispered?

"Well, my attorney doesn't want me to go out on a limb here. But I can tell you this. The American Board of Medical Specialties sanctions 24 medical specialties, many of which have subspecialties."

"Can you narrow it down to three," I asked?

"Yes, that I can do. Proctology, orthopedic surgery, otolaryngology."

"Proctology? I need a proctologist? It's my neck that might need surgery."

"I didn't say you needed a proctologist. I'm simply giving you a list of three Board specialties. But, come to think of it, that's not one of the Board specialties. Number 3 should have been, ah, neurological surgery."

"Should I start with an orthopedist?"

"Bingo!"

"Can you recommend someone?"

"Ah, let's not go there. I can't give you a name but I can give you a list of three, as long as you accept responsibility for the list by selecting the first letter of the last name."

"Do you have anyone with the letter 's'?"

"Actually, I've got 1, 2, 3, 4. Let me give you three......"

Who developed The Rule of Three remains shrouded in real estate lore. My guess is that it was an old time actuary, totally devoted to his work, who hated the great outdoors. Still, The Rule of Three is a step up from handing buyers pages photocopied from the Yellow Pages - but only a baby step up.

We receive much wisdom from the Risk Management community, descendants of The Actuary, advising real estate licensees to refrain from selecting third party providers. Certainly we can't be held accountable if the client makes the final selection, or can we?

Q. "Is it your position that you are not negligent because the buyer picked Roy as the home inspector, rather than Bill or Jim?"

A. "Yes, sir. I made a card for each guy, placed the cards backwards on a dart board. Then my client, a leftie, not me, threw the dart and hit Roy's card, all the way on the right. So, your Honor, members of the jury, there's no way that I could be responsible for my client's lousy aim. In addition, my client did not disclose that he had rheumatoid arthritis in his wrists."

I suggest that in the real world we must recommend to our clients, and recommend, and recommend again. It is the stuff of being a professional - whether it's about mortgage financing, or title insurance companies, or home inspections.

Mortgage financing takes more time to discuss. So let's talk about home inspections. As with the doctor visit, the first issue is not whether to give clients a list of home inspectors. The first issue is recommending what specialists are called for by the transaction.

Real life example, January, 2001. My clients offered almost $1,000,000 for a serious fixer. It will take another $200,000 to bring luster back into this old San Francisco Victorian. The purchase is to be as-is. The seller provided a good disclosure package, including a contractor's report and a structural pest control report - although I did note a slope in the dining room floor, a condition not mentioned in the reports.

There are recommendations to be made, and decisions to follow. Or are there? Given the disclosure package, do the buyers need to hear anything else?

Should I have handed my clients a ballot, no chads, two options:

Yes No No Further Inspections Required
Yes No Further Inspections Are Required
This ballot was completed with absolutely no pressure from anyone. We alone are responsible for the above choice. No one else, especially not Leo© our Beloved Realtor®, is responsible. Signed under penalty of perjury by adults of sound mind, with 20/20 vision, after a good night's sleep.

Or, should I have recommended to my clients .....

You need a structural engineer.

You need a licensed contractor, in the business of home inspections, who is double licensed as a structural pest control operator. If he notes discrepancies with the report prepared for the seller, then we may have to get our own structural pest control operator.

You need masonry contractor to inspect the masonry chimney that was in existence in 1989, the year of the Loma Prieta earthquake.

The long and short of it, we ended up with five inspectors, as I recommended - all of whom I selected.

My clients did not hire me to be List Guy. That's a role reserved for Jim Carey, if they ever make a movie about this Rule of Three concept. Rather, my clients hired me to advise them, to protect them, to bring some clarity to the process. As a buyer's fiduciary my job is to come up with reasons why my client should NOT buy the home. This approach does not alienate my peers. To the contrary, it assures them that we will not be joined as co-defendants some day in the not too distant future, hoping against hope that the Rule of Three will absolve us.


Copyright ©1996 through current year, Leopold A Rodriguez
All Rights Reserved