We are, first and foremost, lawyers. As lawyers, we are able – indeed, we are legally required to – provide representation to our clients that is  more sophisticated than what is provided by real estate agents. In fact, there are several differences between us, as lawyers, and real estate agents. Here are a few – and why each one should matter to you:

Duties to Clients

We don’t doubt that the vast majority of real estate agents are ethical and do their best to represent their clients. However, by law, the duties owed by real estate agents  to their clients are limited. These limited duties allow them significant leeway in regards to their obligations to any particular client. For example, an agent can represent both the buyer and the seller in the same transaction, even though the interests of the buyer differ from those of the seller (the buyer wants the lowest price possible, while the seller wants the highest). This “dual agency” can easily put the seller in a compromised position. Moreover, an agent is not prohibited from “self-dealing.” In other words, an agent can both represent the seller and be the buyer of the property. This also puts the seller in a compromised position.

In contrast, lawyers have clear and unequivocal duties to their clients. These duties cannot be compromised by the attorney’s obligation to another client or even by the attorney’s own self interest. In a typical arms-length transaction, an attorney cannot represent both the buyer and the seller. Similarly, if an attorney has been hired by a seller to assist with the sale, the attorney cannot buy the property. The clients’ interests must be paramount, without any question or doubt.

Why it Matters: If you want “representation” in a transaction, you should know that your representative is truly and completely looking out for your interests only. Anything less and you are not getting the best representation possible.

Compensation

Agents are typically paid by commission.  This commission is paid only if the transaction closes. Thus, if  it does not close, the agents  do not get paid for their services.  This obviously gives an agent a strong personal incentive to convince the parties to close, even though closing may not be in the clients’ best interests (they could have changed their mind, or there could be an issue with the property). In addition, commissions can vary based on the terms of the offer or other factors, and an agent may not have  a duty to inform the client about these variations. For example, some sellers offer an extra commission to any buyer’s agent who presents a full price offer. The buyer’s agent has no obligation to inform his clients about this extra personal incentive, even though it might not be  in the buyer’s best interest to make a full price offer.

In contrast, as lawyers we are paid directly by our clients. We do not take any portion of a commission otherwise available to us as agents. We charge a flat fee for our standard brokerage services (and another flat fee for our legal services via our law firm), plus additional fees for additional brokerage services. However, if it turns out that closing is not in your interests (because you changed your mind, or because there is some late-discovered issue with the property), we have no incentive to convince you to close. Want to cancel the deal?  No problem – you won’t get any protest from us.  Is there an extra commission to the buyer’s agent for a full price offer? Great!  It will go to you and will have absolutely no impact on our representation.

Why it Matters:  Commission-based fees earned at closing create an incentive for agents to get their clients to close,  even where it might not be in their clients’ best interests to do so. Moreover, given the commission system, agents may have a personal incentive to convince their clients to make a full price offer on a particular property, even though that particular property, or paying full price for it, is not in the clients’ interests.

Legal Counsel

Real estate agents are only authorized to engage in the limited practice of law. This means that agents are limited by law to filling in pre-printed forms that were drafted and approved by a lawyer. Agents are not supposed to provide legal counsel to a client. In other words, they are neither authorized nor trained to explain the terms of the contract. If you have a unique issue in your deal and want it addressed in the contract, your agent may not be legally authorized or trained to draft an appropriate contract term to protect your interests.

Similarly, agents are not equipped to handle title issues.  Agents aren’t trained or authorized to give a client any opinion on the condition of title or the significance of the information revealed in a preliminary title commitment.  There is significant risk to a buyer that he or she will buy a property subject to certain restrictions or title matters that are inconsistent with their intended use.  These are the kind of things that, if known by the buyer, might have dissuaded the buyer from purchasing the property or caused them to offer a reduced price.  For sellers, the last thing you want to do is sell a property with an unresolved title defect (such as an encroaching fence) as this can easily come back to haunt you months or years later.

In contrast, lawyers are specifically trained and authorized to practice law without limitation.  The vast majority of lawyers have a four year college degree and a three year graduate degree from law school.  They have passed a difficult and comprehensive exam (the “bar exam,” a two and a half day ordeal).  They have gained – and proven that they have – the knowledge needed to competently practice law, and they have the license required to do so.  Got a question about the terms of your contract?  A lawyer can answer it.  Concerned about an issue or aspect of the transaction?  A lawyer can deal with it.  Worried about whether there is a defect in title?  A lawyer can find out and, if so, address it.

Why it matters: The purchase or sale of a home is a legal transaction involving an asset worth hundreds of thousands of dollars.  There are many legal issues involved, from the disclosure requirements imposed on the seller, to the formation of a binding contract that protects your interests, to the closing documents that will transfer title.  It makes sense to use a lawyer who is able, authorized, and, once hired, obligated to fully protect your legal interests.

History and Culture

Today, real estate agents are considered to be representatives of their clients who act in their clients’ interests.  However, this is a relatively recent development.  Historically speaking, agents were salespersons.  They sold property just like a car salesperson sells cars.  If you have any doubt about that, rent Glengarry Glen Ross, or even just the brilliant ““motivational speech” delivered by the actor Alex Baldwin.  Even today, the buyer’s agent is officially known as the “selling agent.”  Similarly, real estate brokers will note that the agents in a particular office “sold” a certain number of houses, even though the agents did not “sell” anything.  Rather, the agents represented buyers who bought properties.  Continued use of the terms “selling” and “sold” is telling.

In contrast, lawyers have always provided representation, period.  There was never a time when lawyers were paid to convince their clients to buy anything.  Lawyers are, and have always been, their clients’ representative who is only concerned with protecting and advancing their clients’ interests.

Why it Matters: Watch the movie.