How to Find Financial and Tax Advisors When Selling Your House

By Eric Tyson, Ray Brown

If you need the services of another advisor, such as a tax or financial advisor, find one who works by the hour and doesn’t have a vested interest — because they sell investments or manage money for an ongoing fee — in your house-selling decision. Few financial advisors work on this basis. Although tax advisors are more likely than financial advisors to work for an hourly fee, they tend to have a narrower-than-needed financial perspective. A competent tax advisor may be able to help you structure the sale to maximize your tax benefits. For most transactions, however, a tax advisor is unnecessary.

If you want to hire a financial or tax advisor, interview several before you select one. Check with your agent, banker, lawyer, business associates, and friends for referrals. As is the case with selecting your agent, you should get client references from each tax advisor and call the references.

A good financial or tax advisor should possess the following qualities:

  • Does the advisor work full time in this occupation? The realm of personal finances and taxes is too vast for you to trust a part-timer. You need the services of a full-time professional.
  • Does the advisor speak your language? Good advisors can explain your options in simple terms. If you don’t understand exactly what the tax advisor is saying, ask for clarification. If you still don’t understand, get another tax advisor.
  • Is the advisor objective? Hire someone who works solely by the hour and doesn’t have a vested interest in the advice he or she gives you. Never blindly follow the advice of experts because you’re in awe of their expertise. Experts can be just as wrong as ordinary mortals.
  • What is the advisor’s fee schedule? Hourly fees vary widely. Don’t pick someone strictly on a cost-per-hour basis. An advisor who’s just beginning to practice, for example, may only charge half as much as one with 20 years of experience. If the rookie takes four hours to do what the old pro does in an hour, which advisor is more expensive in the long run? Furthermore, the quality of the seasoned veteran’s advice may be superior to the quality of the novice’s advice.
  • Is the tax advisor a Certified Public Accountant (CPA) or Enrolled Agent (EA)? These professional designations indicate that the tax advisor has satisfied special education and experience requirements and has passed a rigorous licensing exam. A CPA does general accounting and prepares tax returns. An EA focuses specifically on taxation. Only CPAs, Enrolled Agents, and attorneys are authorized to represent you before the IRS in the event of an audit.
  • Does the tax advisor have experience with real estate transactions? Tax practice, like law or medicine, is an extremely broad field. The tax advisors that big corporations use may be wonderful, but they aren’t necessarily best for you. You need a tax advisor whose clients have tax problems like yours.

The best advisors in the world can’t do much to change the financial and tax consequences of a transaction after the deal is done. If you’re going to consult advisors, do so before you make significant financial decisions.