Ever Wonder What Some Attorneys Think Of You?

90There is an obscure provision in the FAR/BAR contract that offers some unique protections to a licensee if – among other things – a party has misrepresented any information to the licensee (or there is incorrect information available in the public records), the licensee makes a faulty third party referral, or any such third party vendor provides defective products or services to a contracting party.

Section 14 of the contract provides in part:

Buyer and Seller (individually, the “Indemnifying Party”), each individually indemnifies, holds harmless, and releases the Broker and Broker’s officers, directors, agents and employees from all liability…including all costs and expenses, and reasonable attorney’s fees at all levels, suffered or incurred…in connection with or arising from claims, demands or causes of action instituted by Buyer or Seller based on:

  1. inaccuracy of information provided by the Indemnifying Party or from public records;
  2. Indemnifying Party’s misstatement(s) or failure to perform contractual obligations;
  3. Broker’s performance, at Indemnifying Party’s request, of any task beyond the scope of services regulated by Chapter 475, F.S., as amended, including Broker’s referral, recommendation or retention of any vendor for, or on behalf of, Indemnifying Party;
  4. products or services provided by any such vendor for, or on behalf of, Indemnifying Party; and
  5. expenses incurred by any such vendor. 

Buyer and Seller each assumes full responsibility for selecting and compensating their respective vendors and paying their other costs under this Contract whether or not the transaction closes.”

There is a small fraternity of attorneys who will insist this provision be stricken from the contract offer. 

This leaves buyers and sellers off the hook for any misrepresentations they may have made, and the licensee open to claim in the event one of their recommended referrals (i.e., home inspector, lender, closing agent, roofer, electrician, pest inspector, handyman, surveyor, septic inspector, plumber, and so on) renders defective service.  It also removes the specific responsibility for sellers and buyers to pay for the services of the third party vendors they utilize.

For a seller or buyer, this is not an unhappy turn of events – they’re not on the hook financially, or for being less than forthright.  Yet the licensee is potentially liable for the actions of the third parties the licensee refers, and possibly the fees for said vendors if the party fails to pay.

So what do you do when put in such a position?

You want to render comprehensive service and guidance to your client, yet with the stroke of a pen, their attorney leaves you holding the proverbial bag for your professional efforts.

Do you raise an objection and risk creating an adversarial atmosphere?  Or, do you just go about your business with fingers crossed, hoping that everyone performs as expected (and you don’t run into a situation like the one [true story] where the respected home and pest inspectors both missed the massive termite infestation in the property’s truss system, necessitating tens of thousands of dollars of post-closing repairs for the unwitting buyer)?

Dishonesty and misrepresentation can be difficult to peg.  According to Realtor Magazine: “Use..seller disclosure forms (and be sure that the seller fills out the form). [D]ocument sellers’ sources of information and encourage the use of other professionals, such as inspectors and attorneys, whenever appropriate. Avoid making predictions, such as “This well will never run dry” or “The value of this house is sure to appreciate.” They’re recipes for disaster.“

On the referral issue, you can simply pass along the third party referral responsibilities to the client’s attorney, leaving yourself free from any possible liability for defective performance by a vendor.

Most professionals, though, would feel like they were not doing their job, and furthermore maintain a trustworthy network of third party professionals upon which they rely, so a fallback position (and one some brokerages have adopted), is to provide a list of referrals with contact information and a bold-faced disclaimer, and leave it up to the client to make the hiring decision.  You can also ask the client to oversee whomever they hire once the decision is made.

While a discussion on the laws of agency and referral are lengthy enough to fill at least another post (or two), suffice to say that this situation is an excellent reminder to continually vet your third party vendors to ensure their performance is of the quality you expect and your clients deserve, and to always remain vigilant in seeking out forthright clients with which to work.

You will also want to check with your liability insurance carrier to understand what coverage you have, if any, should the work of any of your referral partners turn up defective.

And, when faced with this unique situation where your client’s attorney puts you on the defensive, be sure to alert your broker about the proposed contract revision, and if you proceed in the normal course and wish to make referrals, be very judicious with your selections and utilize your A-Team for every component of the transaction under your control.

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This information in this site is not intended to establish an attorney-client relationship, and if anything herein could be construed as legal guidance or advice, I strongly encourage you to consult with your own attorney before relying upon any such information.

 All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.


Money In The Middle

picture-uh=a3f8b524389a1b66624b1f42f2699cc-ps=f92e749295e9ecb15f731ffd9b1c489It can be a funny feeling, finding yourself stuck in the middle… The middle of the road. The middle of the night. The middle of nowhere.

Or, for a transaction broker, that perfectly legal place: the middle of the deal.

Representing both sides puts the agent smack-dab at the intersection of honesty, fair dealing, and potentially unreasonable (and un-addressable) expectations. Not only are you managing twice the details, but also double the perceptions.

Even with the deal negotiated and the contract signed, middle ground in the middle of a transaction can be tricky to achieve. Given that in some states such a relationship is not permitted, you may be working with clients who are at best skeptical of the arrangement. In every case, accolades and attaboys can whipsaw into discontent and distrust if the agent isn’t careful each and every step of the way.

Under Florida law, it shall be presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer.” Transaction brokers, by definition, “provide a limited form of representation to a buyer, a seller, or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent. The duties of the real estate licensee in this limited form of representation include the following:

  • Dealing honestly and fairly;
  • Accounting for all funds;
  • Using skill, care, and diligence in the transaction;
  • Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer;
  • Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;
  • Limited confidentiality, unless waived in writing by a party. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, of the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or of any other information requested by a party to remain confidential; and
  • Any additional duties that are mutually agreed to with a party.”

From a purely practical perspective, how does the savvy professional manage this arrangement to everyone’s reasonable satisfaction and a mutually profitable conclusion?

Disclose.  The statutory disclosure form is just the beginning. Knowing this is but one more piece of paper in an extensive pile, a shrewd agent will make and take the time to explain the nuances of the arrangement, and be candid about any prior relationships and dealings with any of the involved parties. The goal, of course, is to work through to an understanding about how this all dovetails with the agent’s legal and ethical obligations to each client in the transaction, and to set realistic, achievable expectations up front.

Refer.  With the agent’s representation being limited, it can help deflect possible conflicts if both seller and buyer engage their own attorney. This ensures that each side has a confidential sounding board squarely in their court, which can in turn be of value to the agent should any potentially controversial issues arise later.

Communicate and update.  Within the boundaries of the agent’s statutory obligations, keeping the lines of communication open and consistent can go a long way toward leveling the playing field and making everyone feel like they’re getting equal time (and by extension, not being left out of anything important). “Reply all” – when possible or practical – can be a valuable tool on many levels, real and perceived, when communicating the mundane details that propel a transaction forward from contract to closing.

Stay above the fray.  Sometimes, and without apparent provocation, the winds can kick up and it becomes hard for even the most seasoned transaction broker to stay the course in the face of deteriorating relations and unreasonable demands. However, in the spirit of honesty and fair dealing, it behooves the agent in the midst of a controversy to take a step back, enlist the guidance and input of objective advocates, and serve as the calm in the center of the storm. Part and parcel of this is mustering the gumption to be measured in your responses, supportive when called upon, and consistent across party lines, all the while staying focused on the clients’ needs, the contract terms, and your legal and ethical obligations to each party.

Call in the big guns.  One of the best tools available to the transactional agent is the one that sits right down the hall – your managing broker. A careful agent will enlist their manager’s assistance up front, and often again throughout the transaction, if for no other reason than to have a second set of eyes (and ears) checking your work and, more importantly, helping you gain clarity and chart your best course when storm clouds start to form on the horizon.

Boiling this all down, while it sounds great in theory to “bring both sides,” the arrangement can be an awkward one if not handled with a deft hand and a keen eye. Suffice to say that like most facets of the agent’s practice, transaction brokerage is as much about legal responsibilities, as it is about intuition and the ability to communicate and manage the process effectively.

For these reasons it behooves the astute agent to take a methodical and thoughtful approach should the transactional opportunity present itself. And, be unafraid to get help when and where needed to ensure that buyers and sellers alike are competently represented, while in turn fulfilling your legal and ethical responsibilities each and every step of the way.

As always, I welcome your questions and feedback, and wish you safe travels on the road to closing.

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This information in this site is not intended to establish an attorney-client relationship, and if anything herein could be construed as legal guidance or advice, I strongly encourage you to consult with your own attorney before relying upon any such information.

 All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.