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?
We’ve recommended an attorney who all parties had been happy with many times; I’ve seen people reject our advice and get nailed by attorneys who don’t communicate with their clients, who go on un-announced vacations, etc., and of course we’ve seen outside attorneys who are great. There are lots of pain in the ass attorneys out there who will ruin your deal, so if you don’t take the advice of your broker, at least take the advice of someone else you know who has had a good experience…
While I did this and didn’t exactly see a concrete problem, I wouldn’t do it again.
I think that Johnny and DL have a healthy skepticism.
We used the attorney our broker recommended and were very happy with her. She went above and beyond in helping us with some lingering issues. She’s become a friend and we will use her again in the future even if we don’t use the same broker again.
I don’t see how any successful attorney in NYC would be so entirely dependent on broker referrals he/she would willingly breach fiduciary responsibility when making a deal for a client. Any respected, successful RE law firm will have an existing client base (incl. developer and commercial clients bigger than we little people buying condos and the like) and get new clients via word of mouth from existing clients as much if not more than from brokers. But if getting the referral from your broker makes you nervous then ask friends who their attorney is.
Don’t confuse this with inspectors though — you shouldn’t ever use the inspector your broker recommends.
Agree with DL and Johnny. There is a lot of gray area before you get to a real ethical violation. Does the attorney downplay bad information, say things like “this is common” or “it’s nothing to worry about” or “you don’t really have negotiating leverage” or “it’s done this way all the time” when an aggressive response might get the other party to back down? There are lots of ways an attorney can communicate with you or not about a deal, all of which shape your reactions. I want to know that my attorney has my back and my back only.
I was lucky to have that kind of representation in a deal that went very, very sour (she’s not practicing in Brooklyn anymore, or I would make the referral). In a normal deal without problems, you probably wouldn’t know the difference. But part of the lawyer’s job is to protect you from problems you can’t see, not just to get the papers handled right.
Yeah, what David Lewis said. Theoretically, a lawyer with a good income stream from a broker is in reality also beholden to the broker. Who gets paid only when the deal goes through.
The fact that someone is obligated by law to represent my interests and my interests alone doesn’t make it so. Same could be said of mortgage brokers pushing bad loans. Of course, the vast majority of loans “pushed” were appropriate for the buyer. But some weren’t.
Granted, I’m making a much bigger deal of this than the situation warrants. It’s a minor theoretical issue. But I wouldn’t take a broker’s recommendation for a lawyer.
Here’s the problem, I think. One of the reasons you get a lawyer is on the off-chance there’s a reason you should *not* want to “get the deal done.” In that case there may be a conflict — the lawyer may hesitate to give you the bad news about the deal (say, she or he’s reviewed the co-op minutes and discovered the board is in total disarray) because he is indebted to the broker, who needs the deal to go through. I know it would be unethical of the lawyer to withhold this information, but I’ve known of lots of lawyers doing unethical things that were in their monetary interest. Always best to get somebody with no potential conflict.
And by the way, my experience is that “Real Estate Agents” have at best a dim understanding of what a conflict of interest is.
As a former Real Estate Agent, I can tell you that generally speaking, its an advantage to use an Attorney that has a relationship with the Broker. The Attorney has obviously worked with the Broker before and because of this, and the prospect of working on future deals, the Attorney will do everything possible to make the deal happen, while still acting in the best interest of the client.
A Broker’s main concern is to get the deal done, and you might view that as a conflict of interest, but in reality its not. An attorney is obligated by law to protect their client’s interest, but I’ve seen many who let their egos get in the way. The best attorney will do two things: protect theit client, and compromise where necessary to get the deal done.
You have every right to choose your own attorney, but make sure it comes as a recoomendation from someone who’s had a positive experience with him/her.
So where’s the conflict then? The lawyer does not represent the broker, and is required by law to act on behalf of, and in the best interests of his/her clients – if the lawyer somehow capitulates to the interests of the broker over those of the clients, then that lawyer is in deep doodoo. Not only does he/she get a bad reputation, but could also face disciplinary action if there is a complaint. There is no upside for the lawyer to do this, only downside, and the money to be made from a closing is minimal compared to the potential liabilities.
Respectfully don’t agree. There is a conflict of interest. The broker wants a smooth closing whereas you want a fair contract executed fairly and all issues brought to light by your lawyer so you can make an informed decision about them.
OK, in practice, kinda the same thing, but not always. Their recommended lawyer’s probably fine. But why take the chance when there’s a lot of good lawyers out there.