Archive for the ‘Attorneys’ Category

Lawsuits On the Rise Against Real Estate Agents

Friday, June 13th, 2014

When the real estate market heats up, so do the number of lawsuits against real estate agents and their brokers. Many buyers and sellers of real estate do not often pause to consider that they are involving themselves in a legal transaction, which can have severe consequences if not handled properly. Many agents, whether intentionally or by mistake,  unfortunately do not understand the ramifications of contract law.images

Here are the main areas for which agents and their brokers are sued in real estate sales-related cases:

1. Failure to advise on a contract. Real estate agents have a duty to make sure buyers and sellers understand the contacts they are signing. If there are any problematic issues or clauses in the contract the agent needs to make sure her clients understand them before signing. It is important to remember here that there is a fine line for agents – only attorneys can give legal advice (see below). An agent can explain a contract clause but should always defer to her broker and an attorney if further clarification or if advice is needed.

2. Giving legal advice. Only an attorney is licensed to give legal advice. Unfortunately there are many agents who provide legal advice, whether intentionally or not (most just have no clue they are doing so). I have seen it happen. The golden rule for agents is to not provide any advice on the contract that could be considered legal advice…when in doubt tell them you cannot give legal advice and refer the question to a broker (or if an agent is a broker he can refer directly to an attorney).

3. Misrepresentation of property features. This is a leading cause of real estate sales litigation. The key to avoid litigation is to be honest. Exaggerating features of a property or claiming it has features it does not can land agents in the hot seat.

images-34. Failure to disclose defects. Real estate agents have a duty to disclose any known defects of a property, or any that they see that are obvious (think big wet spot under a sink or in a ceiling, or an HVAC system that does not come on when started, for example). It is important to remember that a real estate agent is not held to the same standard as a home inspector, but here in California most agents complete an Agent Visual Inspection Disclosure, in which they document any known or observed faulty conditions.

When in doubt, always disclose (this is the same thing agents should tell their sellers when they fill out their disclosures – disclose everything). This is especially important if a listing agent has an escrow fall out and has been given a home inspection or other reports from a previous buyer – at that point the agent and homeowner are considered to have knowledge of the issues that were discovered and reported, and must disclose those items and provide the report to any new buyers.

There have been rumblings in past years about allowing only licensed attorneys to obtain broker licenses, but that has never been implemented. It may help reduce lawsuits, but the problem is that mistakes will still be made by agents, and brokers will often not catch them (especially brokers who oversee large numbers of agents).

The best security for buyers and sellers is to work with an agent who is also an attorney. In many states only attorneys can be the closing agents in real estate sales (here in California we have escrow officers instead, but attorneys can handle them as well, although this is rare). Working with an agent or broker who has a legal background offers peace of mind for both buyers and sellers of real estate.

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Buying and Selling Real Estate: Should You Hire a Lawyer?

Friday, March 22nd, 2013

I decided to write this post because of the crazy antics I have seen in the real estate profession, especially lately. I want to preface this by saying that there are many wonderful, experienced and knowledgeable agents out there, but unfortunately there are even more who are not. Every week I see examples of contracts that are not properly executed, comments that are made that are incorrect, and even blatant misrepresentation of clients and agents giving legal advice (which is usually incorrect)…not to mention the plethora of ethical violations that happen on a regular basis.

If you frequent my blog you know that I always try to write things in a positive light, but I just don’t have a better way to say this: it is extremely beneficial for buyers and sellers to work with a broker who is also an attorney, OR if they want to work with their current agent, to have an attorney review their legal documents. I say this because it can help avoid litigation, and we all know that it is a litigious society in which we live.

Here are some of the things that I see happening all the time, which can be avoided by either working with a broker/attorney or having an attorney review your paperwork:

1. Agents drafting addenda to the contract without having it looked over by an attorney or broker (only attorneys can draft contracts, as they are trained to understand the legal ramifications. Since addenda are part of the contract they should not be drafted by people who are not attorneys…or in the LEAST their broker should review any drafted document before it becomes part of the contract).

2. Agents giving legal advice (only attorneys are allowed to give legal advice)

3. Failure to fill out the contracts correctly (omitting information, checking the wrong boxes or writing in language that could create legalities)

4. Trying to negotiate tough situations that could have legal ramifications (including short sales and tricky resale situations) – lawyers are professionally trained negotiators (again, other real estate agents CAN be good negotiators, but if you have a difficult situation you may want to consider having an attorney get involved).

There are many other ethical violations that continue to inundate our profession, and most of them do not depend on whether or not one is an attorney; however, an attorney is usually better able to recognize an ethical violation, especially when one is cleverly couched. This is perhaps the thing I see most often and, sadly, many of the agents committing offenses have no idea they are doing so. What does this mean? The real estate profession as a whole NEEDS to have better training standards and stricter license and license renewal requirements.

Some people think that real estate agents do not work hard – I know this is not true. The skilled and good agents work their tails off. In fact, I work longer hours as a broker than I did when I practiced law. If you have an agent who is not working hard, than you are working with the wrong agent. Please check into an agent’s credentials before signing up to work with one. Check into not only their real estate industry experience, but their education and extra certifications. Don’t be afraid to ask!

If you have an experienced agent he or she can tell you if a situation arises that is beyond the scope of their training or abilities, and oftentimes their broker can intervene and help straighten things out. If you do not have an agent and are thinking of buying or selling, there are several broker/attorneys out there who possess skills many do not, and the best part is…you pay no extra money to avail yourself of their legal skills if your agent is also an attorney!

The bottom line is to be aware so you can make sure  you are getting the best representation possible when buying or selling real estate.


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