We’ve been discussing it for well over a year. My wife has wanted to sell the house. It’s time to downsize, she argued. Let’s get out of the suburbs and get more urban, she said. But, in this case, I was the more emotional one. I wasn’t ready to let go. The roof leaked, so we put on a new one late last year. She reasoned that would increase the value and make it easier to sell. Finally, in January, she convinced me. We would sell. But, now, my experience and expertise would have to take over. We would wait until school let out to catch the right time for buyers. That would also give us time to clean up and make a few more cosmetic repairs. We were in agreement and moving forward.

During this time, the discussions were intense. How much could we get, she pondered. I had been watching property values for years and I gave her my reasoned opinion. “No way” she contended. We had no pool, there was so much that she would do to our house and therefore, any buyer would do, that no one would pay that much for the house. I responded that we had kept a clean house, fresh paint, new appliances and air conditioning units, modern kitchen and bathrooms. The house was move in ready. Aside from carpet cleaning or replacement, there is nothing to do that would affect the value, no pool and “ugly” back yard notwithstanding.

During the 6 month lead in to the time to sell, she insisted we call our real estate agent to give her a “heads up”. She was so anxious to get this done. “Why?” I asked. So she could prepare. I assured my wife that the agent didn’t need 6 month prep time. So, a couple months ago, we called our handy man to do some repairs and when he was finished, we made the call. On the Sunday before Father’s Day, our agent came to the house armed with comps and statistics. What she told us was that our house was beautiful and in perfect shape to show. The comps were even higher than I thought they would be and that she believed we could get AT LEAST $5,000 more than I had estimated that we could get. She suggested listing the house slightly higher than the highest comp. We were exactly on the same page. My wife was surprised but very pleased.

The house would go on MLS sometime Thursday. I told my wife that the house would be shown that very weekend – Father’s Day weekend. She said absolutely not. It was too quick and it was Father’s Day. The listing hit about dinner time Thursday. The first showing was Friday morning. There were 3 or 4 more showings Saturday. Our agent told us that we would have an offer by Monday. I told my wife that this would be over by the middle of the week, as did the agent. The offer came in higher than either of us predicted and we countered so as to get nearly our asking price.

While my wife was surprised, our agent and I knew all along how this would play out. There was almost no inventory in our neighborhood, which is a very desirable area for families. Schools are great. Young families want to be here. Our new roof and appliances add tremendous value. Our agent recognized this and highlighted the listing to reflect this.

We have a very short time to get our act together and find a new place. But because we were so much in synch with our agent, I am confident we will be on this process as well. I am a real estate attorney and I know the business as well as anybody. Realistically, I could have sold our house with anyone doing the listing and handling the contract. But the truth is, having a good agent who understands you, your needs and your property can make the process so much easier and stress free. And, from my perspective, it gave me validation and will continue to give me validation as we get through the closing. Choose your agents wisely. They can be gems.

I always tell my clients that I am here to help. I am here to make their transactions easy. I am here to help relieve stress and pressure. I am here to answer questions. It is a familiar refrain. So why do clients wait until it is almost too late, if not actually too late, to call when they need help?

Just the other day, a friend stopped me and asked me if she needed a title search for the new house she was buying and closing on in a few days. I had done a closing for her several years before and she had referred other people to me, so she knew how I practice. My eyes grew very wide as I told her “of course you need a title search and title insurance”. “Will it take long? Will it cost much” she asked. After a lengthy discussion, my friend e-mailed her contract to me so that I could jump in and handle the closing for her.

What I learned what that, because the house was in Martin County, the seller was to provide the title and had selected the title company. The title commitment had already been issued but because my new client had no attorney, the title company didn’t bother to send it to anyone. When we called to ask for the commitment and copies of the closing documents, we set off all kinds of alarms. The client’s real estate agent became defensive. She said that the title company was handling title and we weren’t needed. Perhaps we had been hired to handle the sale of the client’s house. UH OH! I thought we were working with another real estate agent who doesn’t want to work with the client’s attorney. What is she hiding? Likewise, the title company was uncooperative. Once they knew that we were involved, they should have automatically sent us everything. However, we had to ask for every piece of paper, document by document, page by page.

At this point, it occurred to me that I needed to write this post. I’ve written about the need for real estate attorneys for residential closings before (see post HERE). Obviously, this closing is another example of that need. Your agent should protect you, but an agent is not an attorney and some agents, to this day, believe that attorneys only screw up deals. Good agents don’t think that way. If an agent steers you away from an attorney, you have a bad agent. Relying solely on a title company is also a bad idea. Title companies close title. They are responsible to follow bank instructions and escrow instructions only. They are responsible to the underwriter. If you don’t have an attorney, you likely aren’t providing sufficient instructions to the title company and therefore, aren’t getting adequate protections.

But this post isn’t just about using an attorney. It’s about answering the question, when should you call your attorney. Answer: not 10 days before closing! Here, we were able to clean up messes and prevent the client from accepting title with improper and unacceptable title exceptions. However, we did not have enough time to obtain a survey. The real estate agent told her she didn’t need once since she wasn’t getting a loan. (See prior post on need for surveys HERE).

Certainly, don’t wait until 3 days before closing. This same client got totally freaked out when the closing agent for the sale of her house contacted her real estate agent (a different one) to ask where the closing documents were. The closing agent also scheduled closing for 2:00 in the afternoon. The purchase of the new house was scheduled for 3:30 the same day. Funds from the sale were needed for the purchase. No one told the client how she was to provide the closing documents, how she was to get from Broward to Martin County in an hour with the closing funds or how all this was to work. She was a wreck. I now had 3 days to work it out with the buyer’s closing agent, do the documents, solve any title issues and coordinate 2 closings instead of 1. Both contracts had been signed 7 or 8 weeks prior.

And, finally, 2 days before closing is definitely not enough! My partner, Eric Assouline was with his client 2 weeks ago at a summary judgment hearing. After the hearing, the client casually mentioned that he was closing on an “investment property” in 2 days and needed to “protect” that property in case they lost in the litigation. Eric came back to the office to discuss with me. I asked Eric why we were just hearing of this now. Eric shrugged. Had the client talked to us at the time he signed the contract, we could have devised asset protection strategies and properly closed on the property. 48 hours prior to closing? The client had to proceed.

Like I said, I am here to help. But don’t wait to call. Don’t wait until the last minute!

Close-up of silver pen on contract. Selective focus on top of pen.

        I was recently browsing through an in-box full of blogs and articles and came across a great article on Inman.com by Cara Ameer, a Coldwell broker-associate in Ponte Vedra Beach, Florida, 10 Reasons You Never Buy or Sell Without an Agent. Cara is right; you should absolutely use an agent when buying or selling a home. Her 10 reasons just scratch the surface. But considering that I just posted Is Your Real Estate Agent On Your Side? last week, I had to respond to Cara. Many agents, at least here in South Florida, encourage or “suggest” to their clients that there is no need to get an attorney involved in a house closing. Attorneys just muck things up. These agents say that the title company can handle every thing.

             Before I give you my 5 reasons, let me tell you a story about a client, a husband and wife, I am currently helping, whose agent told them exactly that. They were purchasing a home in Coral Springs about a year ago. The inspection revealed that the roof, over 20-years old, needed to be replaced. It could not be repaired. The roof was a shingle roof. This is unusual these days as most South Florida roofs are tile. The cost of a new shingle roof would be about $7,500 and the client asked their agent and the seller’s agent if they could still put up a new shingle roof. Without hesitation, both agents assured the client that shingle was permitted and the client’s agent skillfully negotiated a $7,500 credit from the seller for a new roof.

             In addition, the title company, recommended by client’s agent, did a lien and open permit search on the property. The search disclosed that when the roof was put on the house over 20-years ago, the permit was never closed. Both the client and the agent directed the title company to take the necessary steps with the seller to have the permit closed prior to closing.

             Sometime after closing, the client engaged a contractor to install a new shingle roof. The contractor went to pull a permit for the new roof and was denied because 1) there was an open roof permit on the house and 2) shingle roofs are not permitted in this neighborhood in Coral Springs. Only tile roofs are allowed. The agents and the title company clearly dropped the ball. An attorney would not have. A tile roof will cost almost $30,000. Client would not have closed had they known the cost would be so high and had Seller not agreed to pay it. In this case, while agent did a fine job negotiating a roof credit, he did no due diligence to determine what was allowed in the neighborhood. Consequently, the credit was insufficient and his client, my new client, would not have purchased the house. He exasperated the problem by not assuring that the open roof permit was closed prior to closing.

             My top 5 reasons to use an attorney in closings:

 

  1. An attorney always represents you first and foremost. An agent is likely a transaction broker and owes you no fiduciary obligation.

 

  1. An attorney can and will solve problems that arise during the closing process. My case above is an example. Other examples include title issues or issues with the lender. Brokers can’t deal with these issues and title companies are simply closers. They only follow instructions and won’t point out title exceptions that could be harmful to the buyer or might not be relevant and, I illustrated above, won’t always follow up. In Florida, many attorneys act as agents for title companies. But as your legal representative, attorneys actually read the documents and understand the meaning. Attorneys will work to remove exceptions that don’t apply and will work with underwriters on complicated issues.

 

  1. Where negotiations get heated, an attorney has skills to resolve problems. Agents do as well, but an attorney understands and addresses legal implications and can protect your interests. An agent can’t go this far.

 

  1. Attorneys understand and are up to date on TRID, the “Know Before you Owe” Rule. They can help you navigate loan complexities.

 

  1. Attorneys read and understand the fine print. I have to say here that I am often presented with contracts from agents that are on outdated forms. Current forms address current rules, laws and regulations such as TRID. Agents should be aware of this, but some aren’t.

 

            These are just my top 5 reasons to use an attorney; there are many more. Don’t exclude an agent. But a good agent working with a good attorney make a great team for anyone buying or selling a house.

Business concept isolated on white

        Buyers and Sellers of Florida real estate, particularly residential real estate, generally assume that their brokers and agents are working exclusively for them. And though I have no doubt that the vast majority of brokers are ethical, honest and hard working, the fact is that Florida law provides that all broker relationships are presumed to be “transactional” unless a “single agent” is established in writing (see F.S. 475.275(1)(b)). Is this a bad thing? Not necessarily. However a transactional broker’s obligations might not line up with a buyer’s or seller’s expectations.

             F.S. 475.278(2) sets forth a transactional agent as a “limited form” of representation for both the buyer and seller. A transaction agent shall:

  • Deal honestly and fairly;
  • Account for all funds;
  • Provide skill, care and diligence;
  • Disclose all known facts which materially affect the value of residential property and not readily observable;
  • Present all offers an counter offer in a timely manner; and
  • Have “limited confidentiality”. This means the broker/agent may not disclose that a seller will accept a lower price than listed or that a buyer will pay a higher price than offered nor may the broker/agent disclose what the other side’s motivation is.

 

 

        As an attorney, the limited confidentiality frightens me. You never know what conversations will be reported back to the other side, even with the limitations placed on the brokers. Sometimes conversations and information is inadvertently or casually reported. More importantly, a transaction agent has no fiduciary obligation to the client. While the obligations to the client are important, they don’t give rise to fiduciary obligations. However, the duties of a licensee owed to a buyer or seller who engages the licensee as a single agent are as follows under F.S. 475.278(3):

  • Dealing honestly and fairly;
  • Loyalty;
  • Confidentiality;
  • Obedience;
  • Full disclosure;
  • Accounting of all funds;
  • Skill, care and diligence;
  • Presenting all offers and counter offers; and
  • Disclosing all known facts that materially affect the value of real property and are not readily observable.

 

These duties use classic fiduciary definitions.

            Why can’t a broker or agent represent both the buyer and seller fully? The statute specifically prohibits “dual agency”. A dual agent is one who operates as a fiduciary to both sides. Often, 2 agents working under one broker (though sometimes in different offices) are involved in a transaction. In these cases, it is important that the broker make clear that the relationship with both the buyer and seller is transactional. If either client has previously established a single agent relationship, the fact that one broker is involved would make the single agency impossible to continue. The statute permits a change of the relationship provided that the change is made in writing and signed by the client.

            California currently allows for a dual agency and it is common place there to use one in the above situation. However, the California Supreme Court is currently considering a case that could eliminate dual agency and could change the way real estate transactions are handled in the state.

        From my standpoint, I am not enamored with transactional brokers generally, but tolerate them in residential closings as the material terms of the deal are generally complete by the time I get involved. There is nothing left to negotiate. However, I advise my clients not to agree to transactional brokers in commercial deals. The fiduciary obligation, especially the duties of loyalty and confidentiality is too important. Good brokers can and want to be helpful in getting deals done. If you can’t speak freely in front of your broker, they can’t help.

        When your broker provides you with the agency disclosure form, know what the relationship is that he/she is asking to establish and consider what is best for you.

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