Caveat Vendor, or Let Sellers Beware
Corrections or additions?
These articles by Bart Jackson and Michele Alperin were prepared
for the March 14, 2001
edition of U.S. 1 Newspaper. All rights reserved.
Home Buying for Beginners
And I’ll just tack on another $800 for my filling up
the oil tank,” sagely nodded the seller of my potential dream
house at the closing.
Blanching only an instant, I shot back: “And which oil company
did you say performed that topping off?” He squirmed and mumbled
a name which I called immediately. Turned out not only was the tank
empty, but he owed the oil company $1,100, which he had planned to
leave on my doorstep. I called him on it, and saved a bundle. Score
one for the purchaser.
Alas, such home buying victories stand rare as free loans. More
typically,
the first time home buyer rushes in like a blind man running through
a tool shed and exits unnecessarily bloodied. To help buyers avoid
the sharp edges, real estate broker Margaret Rose speaks at
Mercer County College’s three-session course, “Home Buying For
Beginners,” starting Thursday, March 15, at 7:10 p.m. Cost: $48.
Call 609-586-9446.
Over the last 15 years, from her Hamilton Square desk at Gloria
Nilson,
real estate veteran Rose has seen all the schemes and pitfalls. She
lives where she grew up, in Allentown, New Jersey.
To see her gently nursing a coffee at Teddy’s Cafe in Cranbury, you
might not guess that this casually chatting woman consistently makes
the Million Dollar Club — reserved for those who sell at least
15 properties totaling over $2 million annually.
“Probably the greatest wrong foot a buyer can start off on,”
she says, “is trusting the wrong people. Don’t believe your
friends.
Don’t believe the newspapers, or even one banker who claims to speak
for the whole industry. There is no such thing as a no-money down
loan and everyone does not necessarily have to pay points.” Rose
sees home buying as a logical process:
Find out how large a loan you qualify for. Before yougo dreaming what you want, best to know what you can afford. Theaveragebuyer puts down a 5 to 20 percent down payment. Yet a substantialgroup can float a mortgage with a mere 2 3/4 percent on the line.The old mortgage rule of thumb limiting loans to three times thehouseholdincome is being stretched beyond recognition. Individuals can nowinclude 401K reserves as mortgage considerations. “People withgood salaries, outstanding credit, and solid appearance are extendedcredit far beyond the three times rule,” says Rose. This putsmore of the personal money management on you, however. After buyingyour stately mansion, orange crates may be the only furniture youcan afford.Shop for a broker. The biggest news on this front is thenewly slanted “Buyer’s Agency Agreement,” which gives thebuyer his own personal agent. Traditionally real estate sales peopleare agents of the home sellers, and represent their interests, notyours. This agreement changes the allegiance to the buyer.Some home buyers choose an agent by her own sales figures. Othersopt for the one who most seems to understand their needs and taste.Using whatever method, interview several agents before choosing, anddon’t enter into too long an agreement. You can always renew.Draw up a dream list. Determine what features in yourdream house you would love, like, not care about, or won’t accept.Be exacting, but sensible. “The amount of living space andlocationare the most helpful,” Rose says, “and of course the pricerange.” Maybe the schools are not important, but neighbors, noiselevel, or a swimming pool are. What are the commuting needs? How muchland do you want? Also, be aware that items such as a fireplace ora back porch, “vanities,” as Rose calls them, can always beadded later. View the list not as a lock, but as an agent’s guide.Trust your government. Most municipalities in this area,says Rose, hold very tough house inspections prior to awarding thatprized Certificate of Occupancy, required by the seller of a new homebefore sale. Thus, the odds of your getting a structural lemon arefairly slim. This gives you the freedom to take advantage of thatfixer upper. Nothing so lowers a house’s price as a shoddy appearance,yet nothing is as cheaply repaired as a cosmetic flaw. So if you arehandy, or just willing to live with background repairmen, you oftencan bargain yourself a real gem in the rough. At the same times, saysRose, you will naturally want your own engineer to check the houseover structurally, inspect for termites and radon, and have the well,septic, and furnace all gone over.Visit the local planning board. Your location may seemfine when you visit the house this Saturday, but what can it become?Does your quiet country lane become a thoroughfare at rush hour? Whatabout the land behind you? “The folks over in Georgetown, justoutside of Hightstown, had a lovely development two years ago,”recalls Rose, “They had a long farmland vista. Today they stareat a Shop Rite and the Route 33 extension. These structures’ planswere all on the books, you just had to look before buying.”Yet even if you are wary and watchful, buying a sweet home isstill fraught with land mines. One of the largest bombs is buriedin the homeowners’ association agreement. The development house isoften the swiftest and easiest abode to pick up for the relocatingcouple hastening to move on company bidding. But most of these demandyour signing a contract that binds you to all present and future fiatsof the homeowners’ association. Most associations forbid your oldauto or new trailer be parked in your driveway. You can’t even stringa clothesline. And just try planting one shrub or painting yourshuttersblue without the association’s approval.If you’re buying your house strictly for its resale value, then youwon’t mind the enforced homogeneity. But if you are anindependent-mindedsort, the restrictions may chafe.And if you are considering a townhome, says Rose, realize that eventownhouses, a type of home that lagged in the market throughout the1990s, have now soared in cost. So in the end, should you jump inand grab or even bid up that offering price? Or is the best hunterthe one who waits for the right game? Probably the best answer isto glean awareness from a professional, then to make your decisionwith your heart. After all, you are buying more than a shelter fromtaxes, you’re buying your home.— Bart JacksonTop Of PageMaking Consulting PayBet your shirt on it: Whenever Acme Mega-Tentacle mergeswith UniHostile Inc., thousands of consulting firms are born. Maderedundant by a large corporation, many strike out on their own,turningknowledge acquired over 10 or 20 or 30 years into the basis for abusiness. Over 6,500 private consulting companies already exist inNew Jersey. For those seeking to add one more business to that number,Joel Haness speaks on “Building a Profitable ConsultingPractice” on Friday, March 16, at 8:30 a.m. at Mercer CountyCommunityCollege. Cost: $20. Call 609-586-9446.Haness has probably considered every angle for launching a new venturethat has crossed your mind, and has adopted a fair number of them.After growing up in Brooklyn and doing a stint in the service, Hanessreceived a bachelor’s in mathematics from New York University. Turninghis electronics hobby into a trade, he became an engineer with severalNew York area firms. But a cornucopia of ideas and an ironindependencesoon led him to form Joel Haness Consulting, which he ran for 20years.Today, trying desperately to retire, he heads the Palmyra-basedOctoberGroup, which supplies clients with creative marketing and financialfactoring services.”The first advice I give any person starting out on her own isto visit the Small Business Development Center,” says Haness.This center, which recently moved from Mercer to Rutgers, is partof the government’s Small Business Administration program and offerscontacts, tax and financial advice, loan opportunities and more.For the consultant, novice or veteran, Harness says that finding thatexact niche is the prime directive. It’s more than a matter of yourgreatest expertise. That expertise must be honed to a marketablepackage,fitting a current need. “There is definitely room for thegeneralist,”he says, “provided he has the renowned name, a PhD, or somerecognizableattraction. Otherwise, narrow into a specialty. Peter Drucker,one of the best consultants in the business, deals strictly with CEOsand CFOs — that’s his niche.”Flexibility is key, says Haness. He shifted from his private firmto the October Group to take advantage of the need for financialfactoring.With cash flow falling so far behind outstanding invoices, manybusinesses,particularly hospitals and E-commerce firms, teeter on the brink ofbankruptcy despite black ink. The October Group buys up the invoicesand provides the needed funds so the company can move forward. Hanesssays this is a timely and profitable niche.While setting up your consulting firm may seem fairly simple at first,it’s a highway littered with an over 90 percent failure rate. Hanessinsists on a checklist of absolute mandates to keep your new companyin the running:Look beyond your first client. Most folks decide to takethe leap into consulting because they have one sure client in thebag. The problem comes when you work yourself out of that job —as consultants are ever doing. “Many were the folks, right alongU.S. 1,” says Haness, “who remembered Cobol computer language,made a killing on Y2K, then returned happily to their old jobs.”But if this is going to be a career, you had best be networking andscrounging contracts long before the end of job number one.Produce a product. Frankly, your precious pearls of spokenwisdom just are not enough. It may be only a report or a model ora video, but your client needs something tangible for his dollars.Also, you will find yourself working better, more punctually, witha greater focus if you are creating an actual product.Work out an acceptable rate. Haness believes in thepersonalmethod. Ask yourself how many days you want to work (200 is thegovernmentminimum for full time status). Then honestly ask, “How much moneydo I want or need annually?” After figuring your expenses, alittlesimple division gives you a daily rate. Then compare this with yourcompetition. You may be too low.Sell the image. Haness recalls an occasion when he wasoffered work that didn’t appeal to him. “I really didn’t wantthe job,” he says, “so I pulled the old trick of grosslyover-quotingmy price. The client listened, visibly blanched, paused only a secondand responded, `Well, you must have given a lot of good advice toearn that $2,000 suit.’” The consultant has only his record, histongue, and that aura of expertise to land him the job. Dressingcleverlyis an absolutely must. Normally this means the best tailoring andmost expensive ensembles available. “Of course,” says Haness,”If you are a landscape consultant, French cuffs and silk cravatsmay prove woefully out of place.”Hold dear your integrity. Every item or occurrence ina client’s office — no matter how inconsequential, stays there.”As a consultant, you will be privy to a variety of secrets,”says Haness. “If you leak one negative comment about a firm, youare dead meat. You might as well seek another line of work.”Beware politics, but don’t shun them. Consultants areseldom hired because the entire corporation stands twiddling itsfingerscluelessly in the face of a problem. More frequently, you will behired to make a point on some manager’s political agenda. The CEOmay bring in an outside “unbiased” voice to set forth andthus display the stupidity of the board’s reorganization plan. Orhe may hire you to push his own refinancing program. “Eitherway,”says Haness, “you are viewed as the objective expert, with noaxe to grind, and thus your words carry more weight.”Here is where Haness’ integrity rule becomes an important tool. Remainprivate in all your findings, reporting only to the individual managerwho hired you. This affords you the gift of honesty. Even if you’vebeen brought in merely to back up a tenuous plan, your honesty willprove a saving grace. Give the CEO a report outlining how his planfalls short of the promised 18 percent increased profitability mark.Set forth a more realistic estimate, then offer amendments outsidethe basic plan that may boost the increase closer to his mark. Yourevaluation, given alone in the quiet of his office, becomesappreciatedrather than threatening.Haness’ parting bit of wisdom comes from decades of experience:”You’ve just got to toughen your skin. The client may or may notaccept your advice. No matter how much of a raving idiot you may thinkher to be, simply smile, give her your product, take the check, andoffer follow-up services. After all, it’s not your business. Yourbusiness is to make money.”— Bart JacksonTop Of PageCaveat Vendor, or Let Sellers BewareEveryone has a pet story about the product liabilitylaws. The rear view mirror that is required to state “Beware!Objects seen in this mirror are behind you.” McDonald’sover-heatedcoffee which netted its crotch-scalded customer a cool $20 million.And the $50,000 fine incurred if you murder an OSHA inspector whilehe or she is reporting a flaw in your product.Now the product liability laws are being explained by the man wholiterally wrote the book. William A. Dreier, retired chief judgeof the New Jersey State Appellate Court, speaks on Saturday, March17, at 9 a.m. at the New Jersey Law Center in New Brunswick. The panelwill also include Westwood-based Robert J. McGuirl, RobertSachs of Monte Sachs & Borowsky, and Christopher Placitellaof Wilentz Goldman & Spitzer. One of more than 200 seminars presentedannually by the New Jersey Institute for Continuing Legal Education(www.njicle.com), this should prove valuable not only to lawyers butto the manufacturers whom they represent. Cost: $129. Call732-214-8500.A Plainfield native, Dreier went from MIT to Columbia Law School.In his quarter century on the bench, Dreier faced the full gamut oflitigation, but no one in the New Jersey bar doubts his supremacyin product liability. His 1,000-page tome “New Jersey ProductLiability and Toxic Tort Laws” (Gann Publications) has been themandatory text in most of the nation’s law schools. Having retiredto private practice in 1998, he currently directs the productliabilityarm of the 70-lawyer firm Norris, McLaughlin & Marcus in Somerville.He also teaches on the subject for ICLE and for the New Jersey LawJournal.”New Jersey,” says Dreier, “holds its manufacturers tostricter liability laws, in many aspects, than any other state inthe union.” He feels they are neither unfair nor frivolous, butrather that the New Jersey manufacturer and its legal representativemust be more aware of them. Pay attention, he says, to the four basicproblems facing any maker of a salable product.Manufacturing Defects. The product did not roll off theassembly line as designed and is afflicted with, for instance, metalfatigue. Inspectors do their best, but they can’t catch each flawin the thousands of bicycle frames. Frequently, even the bestinspectiontechniques offer only a partial remedy. Some multi-step inspectionsare too costly. Others may entail total product destruction. Sampletesting of one in ten or one in 10,000 might be the best possibleprotection.But whatever your system, says Dreier, “with this kind of productfailure, you are strictly liable.”Design Defect. Back in the early l970s, a multi-milliondollar government study sought and found the answer as to why toddlerswere falling off tricycles. Since that study, the old, high-seatedthree-wheelers have disappeared from bike shop windows. New, lowerslung designs took their place permanently. And therein lies thesensibilityof design defect law, says Dreier. “You can’t just say `this isa stupid, unsafe design.’ The burden of proof lies on the plaintiffto come up with an alternative design.”In addition, this new design must be practical, both physically andfinancially. “If you made a car like a tank,” he says,”thepassengers would be infinitely safe, but the thing wouldn’t besalable.A hairbrush might be safer if it were made of titanium, but the costwould skyrocket to the absurd.”This risk/utility balance becomes the main battleground in designdefect cases. Yet to enter the fray arguing an assumption of anoperators’inherent intelligence may set you on the low ground. “Ourfactoriesare filled with large presses and punch machines,” says Dreier,”that literally require the non-operating hand to be safelymanacledout of harm’s way.”Warning of Defects. “Yes, the silly ones arelegion,”says the retired judge, “but almost every warning is due to acourt case and every court case due to a real life injury.”(Perhapsit is not the over-cautious judges but freaky nature that leads toour paranoid assortment of warnings.)Most of these questions concerning what needs be in the instructionbooklet, how large warning labels need to be, and what should bepainted”OSHA Orange,” are subject to a mound of federal and stateregulations. Prescription drug labels are held to absolutely fixedFDA specifications, for instance. The question of user sophisticationreappears: That the cockpit of a 747 is occupied by expert personnelshould make exhaustive warnings unnecessary, but any fool can buya multi-blade garden tractor.Successor Liability. Business mergers are like marriage.You are buying into the debts and flaws of the whole family. If youpurchase the Cranbury Beer Company and then use its plant to makeroot beer, you are responsible for the defective glass bottles theymade even before your purchase. “In fact, New Jersey is now theonly state which demands due diligence and traces liability backthroughbankruptcy,” warns Dreier. So even if you pick up a Chapter 11organization, a liability search would stand you in good stead.Thus, while it is a good idea to arm yourself with a clever attorneyto get you out of such scrapes, better still to hire wise managerswho will avoid them. “Preventative product liability,” notesDreier, “is a highly underpracticed art in most businessestoday.”— Bart JacksonNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
