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« What's special about Roanoke | Main | Organizing your time in Paradise »

July 11, 2008

Comments

SC

First, let me say that I have been lurking on your site for months, and so enjoy your musings that I check daily for new posts. In all these months, despite a number of topics that have resonated with me, I have not replied. I had to reply to this one, though, and see if I could help explain the horrible pricing structure that most attorneys have.

Pricing is a sticky subject for professionals. When you a hire an attorney, you're really hiring their knowledge and expertise. The only thing professionals have to offer is their knowledge and expertise, and putting an appropriate price on that is very difficult. Contractors do it every day, and regardless of how little time they spend on your problem, they are charging by the hour for their knowledge.

In NY (and probably many other states) we are ethically constrained from charging on a percentage basis for some types of cases. While it would be appropriate to charge a 30% fee against the award obtained in a successful personal injury case, we are not allowed to charge similarly for a matrimonial or family court matter, because we are unable to guarantee an outcome favorable to the client. Family law usually consists of highly emotionally, highly contested cases - we have to come up with a pricing strategy that offers the client the best bang for their buck, while still appropriately compensating us for our time and knowledge.

Sadly, the prevalent way of compensation for attorneys is to charge by the billable hour. Our office elects to charge in increments of 6 minutes (1/10th of an hour) of the professionals' hourly rate. Other offices have a minimum policy of .2 or .3 as a charge even if it only takes them "2 minutes" to write the fax, which is spelled out in the retainer agreement in NY (and should, in my opinion be spelled out in a retainer agreement, regardless of state of residence).

Incidentally, it never takes "just two minutes" to do anything in a law office, in my experience. First, the attorney or paralegal has to stop what they are working on, to attend to your question, which usually involves a minimum of a 3-5 minute phone call with you, the client. Sometimes, we have to pull the file and refresh our recollection, so that when we prepare an answer to the question, we do it accurately. Then we have to write the responsive fax, which takes approximately "two minutes". Then we have to receive confirmation that the fax was received, and file the fax and receipt confirmation in the file, and put the file away. "Two minutes" to write the fax is now suddenly 10-15 minutes of billable work time on your problem, which is taking time away from the matter the attorney or paralegal was initially working on when you rang. Their time and expertise hasn't changed, simply because they were composing a fax on your behalf instead of arguing your case in court. The base of knowledge and experience is the same, regardless of what function they are serving.

While this may seem unfair, it has the effect of appropriately charging the clients whose matters take up the bulk of our time for the services they are using, and not punishing the clients whose matters are less time-consuming. Most of the attorneys I have worked with delegate as much as possible to their paralegals, in an effort to save the client some money. (My paralegal rate is less than half of what my attorney charges by the hour).

In our office (which is a small, 3-person office), we have chosen to offer a flat fee in standard, personal real estate transactions. We charge $450 for sale, $500 for purchase; $900 if we represent you in both. The bulk of this work is delegated to the real estate paralegal, who is closely supervised by the attorney. We have streamlined the process of closings to the point that we are able to offer the reduced savings to the client. Unless we run into a serious problem, we do not charge on an hourly basis for closings. When we have run into a serious problem, we generally add a charge (which we discuss with the client prior to closing) in a flat amount, representing the "additional" time spent by the attorney and/or paralegal. This amount, and whether or not we charge the client for our additional time, is entirely at the discretion of the attorney.

It doesn't sound fair, but we have to put a price tag on our services somehow. The system is probably broken, but our pricing schemes still seem as fair as we can make it to the individual clients.

To put it another way: You wouldn't walk into your dentist's office with a cavity, and expect to not be billed if they look at it, confirm it is a cavity, and set you up for a filling at a later date. Your attorney is no different.


ocracokewaves

An impressive response. Glad to see you are charging a flat fee for real estate.

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