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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