Atty/Broker Conflict of Interest
I am selling my condo and hope to close on an offer that just came in. My broker recommended a particular RE lawyer to do the contract of sale and closing. Does anyone foresee a problem using a real estate attorney who came recommended by our broker? Any possible conflict of interest in this scenario?…
I am selling my condo and hope to close on an offer that just came in. My broker recommended a particular RE lawyer to do the contract of sale and closing. Does anyone foresee a problem using a real estate attorney who came recommended by our broker? Any possible conflict of interest in this scenario? any reason why the lawyer might not have our best interests at heart?
This may be a little off target, but I think there are fundamental issues regarding realtors and their “interest” in any deal. I personally believe that realtors (some, not all) bear a significant share of the responsibility for the present real estate bubble and its consequences. Who do they represent in any transaction? Will they counsel a potential buyer as to the dangers of obtaining too large a mortgage or simply refer to a broker who will obtain the necessary funding (and send a little commission back)? Will they recommend an appraiser & inspector who will be honest and forthright, or will they suggest someone who will let the deal get done? Bottom line, it is buyer beware – ultimately, it is greed that dictates motivation – I would get my own attorney.
Obviously there is no real conflict of interest, or the state bar would have guidelines in place to prevent this. It’s just that there are a number of plausible motivations that you won’t be aware of.
Part of it is also that in my opinion it’s never a bad idea to have some distance between the various parties in a transaction like this. Obviously plenty of people have done just fine using a broker-recommended lawyer; as I said, our experiences were good and bad. And just as obviously, the vast majority of lawyers are scrupulous about ethics and have their clients’ interests at heart.
Next time, though, we will find our own lawyer, and I would advise others to do so. As for the poster complaining about advice on an online bb…well, you get what you pay for.
With respect broker, I see lawyers do outrageous shit all the time. Indeed, I see judges do outrageous shit all the time.
And yes, by “outrageous shit,” I mean shit that would “compromise their license.”
I know that this topic has been beaten to death djdevvydev, and you probably already lost interest.
But if you want this humble lawyer’s advice: re-read David Lewis’s comments and act accordingly. Slopefarm at 12:02 has it right too.
I know from experience that the relationship between broker and lawyer are not even close to cozy as some want to suggest. There is no “one hand washes the other.” In fact there is even some contempt on the part of the lawyer against the broker in that the broker stands to make a huge amount of money on the deal as compared to the lawyer. Most lawyers even make the broker jump through a lot of hoops and leg work between the accepted offer to the final closing because they feel the broker is making the money he/she should do the work. I don’t know of any lawyer that would compromise their client in the hopes of more referrals from a broker. It is just ridiculous. I am not saying all lawyers are ethical. I am just saying that there is no real substantial monetary incentive for the lawyer to compromise their license. You give the broker way too much power if you think he/she is lining the pockets of recommended attorneys with so much money that they would sell their client down the river. It’s just not that much $ in the end.
I am not an outsider to all of this. I have been through a number of transactions as a client. I have dealt with realtors who tried really hard to push their inspectors and lawyers on me. I have dealt with others who stayed more neutral, which I was happy about. I went with a referred inspector once and was not totally happy about it. I went with my own another time and was happier, although not completely. I used my own attorney both times and was pleased with the representation. I also had a deal go terribly wrong (not the deal with the broker pushing referrals) and I cannot say with any confidence that a realtor-referred attorney would have fought as hard and as well for me as my attorney did, and that I needed every ounce of that fight. An attorney with dual loyalties might very well have managed to stay within the ethical lines without accomplishing nearly as much. Whether or not the entire Brooklyn RE world is polluted, I definitely wandered into corner of it that would qualify for an ethical Superfund cleanup and I am glad I did not have to reflect for a second on my attorney’s loyalties.
The lady doth protest too much, methinks!
It doesn’t ignore the real world – say this happens as frequently as you may think it happens, do you think that the broker and lawyer who screw their clients time and again will keep on getting business and/or referals? The returns are diminishing for a broker and lawyer who engage in this type of conduct – and say a lawyer did this 25 times before getting caught/disclplined – after that, he would be done – and for what, an extra $50,000 or so in his/her pocket – that’s not exactly retiring money and to boot, his/her career would be over.
I’ve swam plenty long in this alleged “polluted world” to know of what I speak and have actual experience, as opposed to some shallow view from the outside. Sure there are some bad apples, but like anything, if you engage in some simple due diligence, these problems can be easily avoided.
I am so sick of some of the advice that people give on this board. You all think you have the answers and you all think your answers are the only ones that are right.
Here’s one way to look at this: your broker recommends an attorney who they have probably had success with, like, respect, and know a deal will usually go smoothly when that particular attorney is part of the deal. There are some top notch RE attny’s out there and those are the ones that probably get recommended over and over. Its the same with contractors. If you’ve had success with a contractor who is good why not refer him/her? Some folks offer kick backs if they get the job, others like the relationships that are built for their businesses.
In your line of work, don’t you like to continue working with those that make your job easier and better? Yes, you hope that a deal will close faster but nothing is gained when a deal is f***ed up so why would you recommend an attorney that sucks?
I say if you like and trust your broker you have no reason not to trust their recommendation. Besides, interview them first (about $ and any other questions regarding the process) if you like what you hear, then there you go. If not, interview others. Get 3 names and see who you are most comfortable with and go from there.
“That is illogical – the lawyer has no incentive to cater to the interests of the broker over his/her client. There is nothing to be gained, financially or otherwise.”
Oh, come on! Everyone agreed above that the broker’s interest is in “getting the deal done,” and that he chose a lawyer who would do that. That lawyer earns a few thousand dollars every time the broker recommends him or her. That lawyer expects to earn many thousand more in the future via this route. That lawyer has a real monetary incentive not to put obstacles in the way of a deal, even if they’re in his client’s interest, to keep the money coming. ‘Cause a lawyer who causes problems is not, by definition, interested in “getting the deal done,” and may well not get further recommendations.
If that’s illogical, I’m a real estate broker. Your assertion that there is “nothing to be gained” by the lawyer is, moreover, absurd (and suggests you haven’t swum around this polluted world for long).
There’s a lot of “faith based” commentary going on here — lawyers never sell their clients even a little bit short, brokers are entirely even-handed in deciding what lawyers to recommend, etc. Ignores the real world.