Importance of Communication in Real Estate

People Listening

Good communication is an important skill in any business, but especially real estate, where good relationships are especially important. Communication is much more than how articulate you are. Communicating the right information to the right people at the right times are all critical. It can help avoid misunderstandings and build trust.

Regardless what you’re currently looking to do in business or real estate, at some point you’ll need to communicate with someone.

If you’re looking to start or expand a business, telling people what your goals are is critical. If you want to acquire a single-family home in a certain area and price, tell people about it. Just like finding a job, the majority of real estate deals are found through relationships, not online. You never know who will present an opportunity. I recall having difficulty finding a good deal in Philadelphia. I mentioned to my contractor at one property what I was looking for and he put me in touch with a wholesaler. The wholesaler found me a deal within a few weeks. I wouldn’t expect a contractor who is looking for deals himself to help me find a deal, but he put me in touch with someone who did.

While running a business, communication is even more important. Do your employees understand your vision for the company? Do they know what’s expected of them in their role? How do those two things fit together?

The more stakeholders, the more you need to communicate. With one employee, there’s only one communication channel. With ten employees, there are 45 different channels of communication (each person can communicate with each other, which increases the chances of misunderstandings). If just one person thinks a new project is about X, but it’s really about Y, how many people will they misinform? Add in vendors, customers and other stakeholders, and you can see the importance of communicating well.

There’s a property management company I use for one of my buildings. There are two property managers working there, and responsibility for managing my building recently shifted from one manager to another. The first manager used to call once per week to give me an update with the property – what units were vacant, who was behind on paying rent, maintenance issues and more. He communicated good information on a regular basis, which I appreciated. If a line item seemed odd on an invoice, we talked about it and resolved it before it became a bigger issue. When I visited the property and talk with tenants, I saw how much they appreciated him too.

When the new manager took over, I spent some time with her and she’s clearly experienced. She knows my property just as well as the first manager. The trouble is, if I don’t call or email multiple times, I can’t get any information out of her. She’ll go months without contacting me if I don’t make the effort to reach out. I haven’t visited the property again for a while, but I can see in online reviews and even the financial performance of the building that things are starting to slip a bit.

I will visit the property and have a talk with her, and I’m sure we’ll get everything straightened out. Until we do, I review every line item of income and expense, questioning what’s going on more than I probably need to. She could easily alleviate my concerns by explaining why there’s tenant turnover, what the extra maintenance expenses are, etc., but she hasn’t. Until she does, I’m left to make educated guesses about the property and her abilities as a manager. Things are becoming a bigger deal than they need to be due to a lack of communication.

Expensive Miscommunication

I recently attended a zoning meeting in Philadelphia. A small developer pleaded to have his lot re-zoned due to a gross breakdown in communication. In this part of Philadelphia, row houses are either built right up against the sidewalk, or set back eight feed from the sidewalk. If the houses on either side are both eight feet back, your house needs set back eight feet too; it would look really odd otherwise.

This developer received approval about a year ago to build a new home eight feet back from the sidewalk, consistent with the houses on either side of his lot. He asked his foundation contractor to pour the foundation and set it eight feet back from the sidewalk. Instead, it’s sit back about eight inches.

Neighbors complained about the oddly-positioned house to the city, who said they’d look into it. The city came out to inspect the foundation, and for some inexplicable reason it passed. The developer noticed the problem during the inspection but didn’t say anything.

Neighbors complained to the city again, who said they’d look into it.

The developer proceeded to start framing the house. That inspection passed too, so he added in windows and doors.

On the third inspection, the house failed. It needed to be set back eight feet from the sidewalk.

The developer pleaded his case to the zoning board, who ruled the house still needed to be set back eight feet from the sidewalk. The developer now needs to take down the house and rebuild it eight feet back.

There was a lot of room for improvement with communication here:

  • The developer could have explained more clearly to the foundation contractor, and asked him to repeat back what he heard to confirm understanding
  • The developer could have talked with the inspector at the first inspection
  • The neighbors could have talked directly with the developer
  • The City should have communicated much earlier with the developer
  • The inspector either didn’t understand what he was inspecting, or didn’t communicate the problem to the right people soon enough

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