What do you do when a buyer, a seller or a real estate agent is angry with you and threatening to sue you? How do you handle real estate conflict? Unfortunately, its nearly impossible to completely avoid conflict altogether. The more deals you do, the higher probability of disputes, even if of no fault of your own. Therefore, you need a formula for handling problems and that's what you're about to learn. The following 5 principles will teach you how to resolve conflict quickly and as inexpensively as possible so you can get back to doing deals and avoid the costs, time and stress of prolonged disputes. These are lessons learned from 2 decades in the trenches of the real estate business:
Principle #1: Choose to be Rich, Not Right
I'm going to ask you a simple question: do you want to be right or rich? In almost any conflict you will need to ask yourself this question. Most successful real estate operators swallow their pride, are void of arrogance, and have no interest or need to be right in a conflict. Their priority is going in the direction that will save them the most money or make them the most money. They want to be rich, not right.
The opposite is true of almost all people. They often use the phrase, "It's no longer about the money, it's about the principle." When you start saying that you are now trying to be right, not rich and you can't act like that as a real estate entrepreneur.
The first and most important rule of resolving conflict is to choose the option of being rich and not worrying about being right. You don't want to focus on what's right, you want to focus on what's most economically productive.
An illustration of how this might play out is if you have a tenant in a traditional rental that hasn't paid you. They’ve lied to you, trashed the place and done all kinds of things that make you mad. You want to teach them a lesson, and you’re tempted to hire an eviction attorney and go through the long, drawn out the process of legal eviction. However, you simply could tell that tenant, "Look, I'll pay you a $1000, but you need to get out right now."
Now, you won’t be teaching them a lesson and you won’t be right because the tenant's the one that broke the agreement with you. Instead, you’re taking the route that is far more economically productive. I call this a friendly eviction and it’s what I've done my entire career. It's much faster and cheaper than going through the legal eviction process, and it works almost every time.
Principle #2: Remove Emotions
This is a lot easier said than done, and yours truly may have broken this principal before, but as I’ve maturated in my career through the years, I've discovered how powerful this principle is.
When You Remove Emotion, You Can Think Clearly:
You end up making bad decisions when you allow your emotions to run rampant. The most common emotion is fear. Maybe you're fearful that the deal will fall apart or that you made a mistake. Some people just fall apart when they're fearful. They want to give the deal back or drop the price by $10,000. You don't want to do that. Remember, the only way to get run over in life is to first lay down. So, don't lay down, hold your ground.
Removing Emotions Keeps You Steady in Your Decision Making:
There's a problem and you feel like you've been wronged, someone in the deal is trying to take advantage of you. What happens if you get angry? If you get angry you could do that one thing that creates a whole new problem; you could make it personal. By taking it to the personal level, you then offend that person and now they're even more fixed in their position. They’re now more focused than ever on being right rather than being rich. So, what you must do is keep calm, cool, and collected while holding your ground because that way you're able to think clearly.
The calmer you are, the more likely the other person will calm down too. They might start off angry; it may even be part of their negotiating strategy to get you flustered. Stay calm and say, "I apologize for our miscommunication. I know you want to buy this house. I know I want to sell this house and this seems like it’s a great fit for us both. Obviously from the inspection, you have a few concerns about the electrical. I want to make sure that we get all those concerns taken care of, but we don't need to rewire the whole house. We just need to deal with a few of the things in the breaker box. So, how do we get this resolved?"
Keep it calm, focus on resolution, and remove emotion completely. Again, a lot easier said than done, but an incredibly powerful principle to resolve conflict in real estate.
Principle #3: Avoid Litigation
Have you ever heard the phrase, "I'm going to sue you for everything you're worth!"? If you have, you're probably hearing that from someone who knows nothing about litigation. In real estate, attorneys are paid by the hour and in real estate litigation only the attorneys win. No matter who the plaintiff is or what the verdict is, at the end of the day, the attorneys get all of their fees back and both parties are mad because neither one gets what they wanted in litigation.
Resolution through Mediation and Arbitration
In fact, that's why all of my agreements call for arbitration. Thankfully, I’ve never had any dispute go all the way to arbitration. Focusing on being rich rather than being right means that I've always mediated and settled. I think it's incredibly important that you first try to avoid getting attorneys involved if possible. No matter how good your attorney is, they're still paid by the hour. The longer it drags out, the more money the attorneys make. They make money for every email you send them, every call, every text, and anything else that the other side does and sends to them. These bills can roll out of control so quickly.
I share this in any situations where people are potentially litigious. I'll say, "Do you have any idea how much money you're going to have to spend on legal fees, and how much I'm going to have to spend on legal fees? It just doesn't make sense for us to go down that road. Let's resolve this. You need the money a lot more than the attorney. Let's focus on getting this accomplished. "
Exception to the Rule
One exception to the rule of not getting attorneys involved right away is when the government is involved. The rule of avoiding litigation still holds true in this example, but you always want to hire an attorney anytime a government authority initiates the conflict or investigation. Whether it is a local government, state or federal government, if it’s any government related authority, get an attorney involved because the government is a whole different animal.
They aren’t concerned about being economically productive. What they care about is enforcing laws, and they have an unlimited legal budget to do so. They have attorneys on staff that are looking for something to do. That makes the government a dangerous animal in the world of real estate conflict.
Let me break that down. Anything you say, can and will be used against you, not used for you. You can’t talk your way out of it. So, what does that mean? That means that if a government authority is involved, you say nothing and hire an attorney to do all the correspondence.
A man moved from Tennessee to Florida. Not long after he had settled into his home, he was out in his yard having fun with a hedge trimmer. Unwittingly he trimmed a plant that he thought was like every other plant, but it turned out it was a protected plant. It was a Mangrove, and they carry a fine of $500 per branch you clip off, and that’s just for the first offense. Now, it just so happened that this man’s next-door neighbor was on the Mangrove Preservation Association and was outside and saw this act take place. They felt it was their duty to call the Environmental Protection Agency to let them know about this horrible act of trimming a Mangrove.
The EPA called the man, and what did he do? He took a message, and then promptly began to research the topic and discovered that other landowners in Florida have had the same problem. In fact, one individual in particular had a $3 million fine against him and had hired an attorney who was able to negotiate the $3 million down to $10,000. So, the man from Tennessee who was new in town called that same attorney and told him the whole story. The attorney did all the talking with the EPA, and in the end there were no fines. It turned out that the trimming of the Mangrove was actually healthy for the plant and the pruning helped it flourish.
This story illustrates principle #3 perfectly. Try to avoid attorneys whenever possible with private individuals and certainly try to avoid litigation no matter what. However, if you're dealing with a conflict instigated by a government authority, hire an attorney to do ALL your talking.
Principle #4: Be Selective When Hiring an Attorney
Now if you do need to hire an attorney, which one do you select? Often people just work with someone they know, a family friend or someone they trust. The problem with that is if the issue pertains to land use development or EPA, you will have to pay them to research the subject. Now you're paying them to educate themselves on their job. Your friend may be a good attorney, but if they don’t have expertise in real estate related matters, you're paying for their education.
So, you need to choose an attorney who already has that knowledge and experience. Chances are whatever your conflict is, someone else has already been down that road many times. Research the subject, look for cases and articles where it’s happened before. Somebody else paid them $30,000 to learn all these lessons so you don't have to.
With this strategy you will end up working with several different attorneys, but in the end you will save money and get more done. Furthermore, it can lead to a faster resolution of the conflict. The attorney may know the matter so well that they can analyze the situation quickly. Foreseeing all the possible problems with pursuing litigation, they may be able to recommend and negotiate a way to resolve the conflict quickly.
A quite common example of this is vacation rentals. Right now, there are hotly contested legal battles in many cities and municipalities across America as the government is trying to impose more rules on vacation rentals. This is mainly due to the hotel lobbyists. There's a lot of power in hotel lobbying, and they're telling government officials how terrible vacation rentals all are because they're trying to protect their hotels. There are a few attorneys that are working on these massive cases for vacation rentals, and those are the ones you want to work with if you have a vacation rental issue.
This principle applies to evictions as well. If you're a landlord, and you are looking for the best eviction attorney to work with, I have a little tip for you. Find out which attorneys appear on the eviction docket the most. See who does most of the apartment buildings, for example, and those are the eviction attorneys that know their stuff. They're the ones that take the judge fishing or hunting on the weekends, and they really know the drill. Those are the ones you want to work with.
Principle #5: Your Attorney is Only as Good as You Are
My mentor's mother taught me this, and she was an incredibly successful real estate agent. She said, "Your attorney is only as good as you are." That means that when you hire a professional, an attorney, you are still the boss, which makes it your responsibility to fully understand the strategy and understand the law. Let the attorney, the good one that you hired, teach you about it so you can lead them. This enables you to ask the right questions:
- Have we ever thought about that?
- Could we try this?
- Why are we going that route?
- What if we just did this?
- Do you think it'll work?
- Why don't we try?
I can't tell you the number of times that I've asked questions where at the end of the day their answer is, "Well, you could do that if you wanted to." It doesn't mean that you're smarter on the specifics of the law. However, the attorney you hired can teach you so you can begin to make more high-level decisions.
There's an inherent conflict of interest between the attorney and their client. Ultimately, we get our resolution done better if we get it done faster, and attorneys make more money if they drag things out. So, your attorney is only as good as you are. You want to dive deep into the situations, understand them, and be able to articulate what’s going on. If you don't understand something, ask so you are clear. You're hiring an attorney, they are working for you, you need to lead them and lead them wisely.
Great Info ! Thanks,
Never even heard of the need to pay a tenant to move – until the great recession.
So, now that 1,000s of investors and landlords bent over and took it in the rear like wimps, we have seen a massive surge in tenants that continue to milk that cash cow of “cash for keys”.
Further, once you have the reputation of being a door mat in any industry, you’re gonna lose TONS of $$$ as more and more people walk all over you knowing ahead of time you’ll capitulate at the drop of a hat.
Phil Pustejovsky says
If it costs $2,000+ to go through the entire legal eviction process; or $500 for a quick cash for keys; if you want to be Rich, go for the Cash For Keys route. It’s not being a door mat. It’s being financially intelligent.
Frank Conley says
Great Video, Thank you for contributing your knowledge.
I use the Win-Win principle. Never gone through an eviction for 25 years.
Lynda Begy says
Wow! Great strategies and insights needed for such a time as this. Thank you for being a great person who understands about giving information that benefits others-as I do. Healthy, wealthy man and wise. Cast your bread upon the waters, and it will return to the sender. Yes bread still means riches. Thank you.
these lessons are very helpful
John wahington says
Pill man thanks for examples for
Settling lawsuits. How to fix problems
Harvey Gates says
Phil is simply an outstanding teacher. AND a highly successful investor. I’d advise anyone to read both books
at least twice; or more. Thank you.
Thank you phill
Darcy McCullough says
I’ve been in RE casually for many years. My very abbreviated background :Formal college courses, construction apprenticeship, Union Commercial Plumbing, tons of Design, architecture, landscape classes.
I also belong to a top-rated RE Investment club,go to seminars , etc.
This is the very first video by Phil that I have seen.
The information given is straight forward, truthful, and very very useful.
I’ve dealt with some of the same issues.
This is the first time Ive ever heard anyone so clearly state what you should and should not do when facing potential legal issues.
I especially appreciate that this video actually delivers useful information by it self and isn’t just a come-on teaser for a “training program”
Because it DOES deliver useful, important information, I’m now interested in exploring what else Phil has to offer.
It’s a good marketing strategy, Phil.
You’ve got my attention.
Hi I just recieved your e-mail about the 5 principes handeling RE problems
There Deens to be a broblem with the volume of this movie
Hope you can fix this
I am follow your Chanel and am realy interested 😉 in this topic
Wish you a great day
Wayne lewer says
Absolutely correct! looking forward ror an opportunity to work with you
THANK YOU PHIL,
Wayne Leer. August 2020
Robert Devaney says
Excellent points. I love the way you get your message across. Thank you! I’m a business broker but all applies.
William Anderson says
Great info! I’ve been a real estate investor for many years and have a comfortable portfolio of residential and commercial rentals. At the end of my career now pretty much and just enjoying the good life. I always watch and enjoy your videos! Keep them coming for old and new investors!