Trust – but Verify

Professionals tell you that things will move more smoothly if you’ve got a professional helping you. Is that good advice?

When delivering lectures, Pat Niland, a mortgage broker who is the president of First Funding, often uses a gimmick to make the point that professionals need to earn their keep. “Who will give me a dollar for five quarters?” Niland asks his audiences. And after some people raise their hands and say, “Here’s a dollar,” he then explains: “What’s the value in a mortgage broker? A mortgage broker better give you more than his fee, because if he doesn’t, then you shouldn’t have one. A broker needs to be able to find you a transaction that you can’t find on your own, or structure a deal that’s better than you can do on your own, or do work you don’t want to do. You’d better get your money’s worth.”

You can say that about any professional. If you have a manager, an accountant, or an engineer, you want their expertise. If you hire a lawyer, you are counting on his or her knowledge and experience to help you avoid huge legal costs. My small Upper West Side co-op learned this lesson when we got into an extended legal battle with a commercial tenant because, in my opinion, our attorney was too conscientious. We’d ask him for advice on how to proceed, and he would respond with a noncommittal approach that was maddening, warning us of all the possibilities but never giving us a clear path. Some members of the board eventually became disillusioned with him because they felt his long-winded replies were a way of jacking up his fees.

An important point to remember is that professionals can make mistakes. Attorney James Samson, a partner at Samson Fink & Dubow, told me about a board he represented that was planning to replace its windows. After talking informally with a couple of window contractors, Samson estimated the cost of the job would be about $500,000. When the co-op finally got the bids, however, he was surprised to see that Kelly Windows, which had been one of those that gave him the $500,000 estimate, was in for $739,000.

The attorney then spoke to the Kelly rep, who said, “That’s not my bid. My bid was for $397,000.” Further inquiry revealed that the managing agent had misread the Kelly bid. “The engineer had asked for two options,” recalled Samson. “There are two normal ways of installing windows: you can put in new frames and windows; or leave the frames and just put in the windows. They asked Kelly for two numbers, one for each option.” But when the bids came in, the manager accidentally added the two numbers together as one bid and came up with the figure of $739,000. (Kelly wound up getting the job.)

You could argue that one professional – the building’s attorney – was the hero in this tale, investigating the situation when things didn’t seem right. But a board member could have just as easily been the one who found the error. So the lessons to be learned? Trust your professionals but don’t blindly follow them. Educate yourself on key issues or projects, so you can make reasonable decisions. It’s certainly more work, but you should do that work because you have a larger stake in protecting your home than your attorney, manager, or mortgage broker does. So, in the end, remember the old adage: trust – but verify.