A lawyer’s sole purpose in the transaction is to protect YOUR interests. In many real estate transactions, real estate professionals do not get paid unless the deal closes. This, obviously, creates a conflict of interest. For example, pretend your real estate agent knows something that would make you change your mind about buying or selling the home. Would your agent tell you about it? Hummmmm….What if the agent REALLY needs this deal to close to keep his doors open? UMPH!
In a foreclosure action, the same is true with short sales and deeds in lieu. Most real estate professionals will not get paid unless a deal closes. Therefore, there are many opportunities for buyers and sellers to “be thrown under the bus” for the sake of closing the deal—which guarantees these real estate professionals’ payments.
Real estate lawyers, however, are, generally, paid regardless of whether the deal closes or not. This gives the lawyer absolute freedom to inform her client of each and every problem and potential problem in the transaction. Hence, a real estate lawyer who is hired to be YOUR real estate lawyer should protect your interests over those of the real estate agents, mortgage brokers, title agents, appraisers, home inspectors—and even over her own self interests!
If you have a deal with a lawyer who only gets paid if the deal closes, you should be careful in determining whether your lawyer has a conflict of interest in the transaction or not. If you have any concerns regarding this matter, be sure to discuss it with your lawyer.
I am routinely approached by real estate agents who want to refer their clients to me for the purposes of me representing their clients as a lawyer. However, each time this happens, I warn the real estate agent of my obligation to fully inform our potential clients and of my fiduciary obligation to our potential clients—which may or may not kill real estate deals. I don’t have to tell you that I never hear from many of these real estate agents again—and who can blame them? They are in business to close deals—not allow lawyers like me to give their clients a reason to walk away them!
(This is different from real estate agents referring clients to me as a title agent. As a title agent, generally, I represent no one--and only work to get the transaction closed and the title insurance policy issued)
Has a real estate professional ever told you that you don’t need a real estate lawyer to represent you in a real estate transaction? Now, you know why . . . !
