Real Estate & Mortgage Insights

Legal Advice, Decisions, and "Butting in" -- a Story.

When you ask a "legal" question, real estate agents will often tell you, "For legal advice, you have to contact an attorney."

Then they will proceed to tell you about past experiences that cover the subject area you ask about, so that you have an "idea" about your question, but they will close by telling you that you still need to ask an attorney for real advice on the topic.

Only attorneys can practice law, and legal advice is one aspect of practicing law. In our litigious society, it makes sense for agents to refer you to an attorney when you ask a prickly question or want an independent review of documents, and so on.

So agents are very careful to refer you to an attorney when appropriate.

However, sometimes lawyers offer more than legal advice.

Recently, a buyer made a full-price offer on a relocation property that they simply "had" to have, agreeing to put fifteen percent down. It was a hot market and multiple offers were expected on the property.

After they submitted the offer, the prospective buyers wanted their attorney to review the document. So they took the submitted offer to their attorney.

The attorney suggested they reduce their down payment to ten percent, saying it was in their "financial best interests."

That isn't legal advice. That's personal advice.

Financially, it normally makes sense. Lenders do not really consider a fifteen percent down loan that much differently than they consider a ten percent down loan. The underwriting guidelines are the same. Mortgage insurance costs are almost identical. Put twenty percent down, and guidelines change. Put nine percent down - guidelines and costs change. From ten to fifteen percent down? There really isn't much difference.

In this situation, the agent had a specific reason for suggesting fifteen percent down, and it was a valid suggestion designed to present a stronger offer in a multiple-offer environment to an institution - not an individual seller.

Did the buyers take the attorney's advice?

The truth is, it's happening as this is being written and no one knows yet. But that isn't the point of the story.

Attorneys offer legal advice. CPA's offer tax advice. Financial planners offer financial advice. Each of them have qualifications that make them authorities on various topics, some of which may involve general real estate advice.

In real estate, though, every deal is different. Advice on one transaction may not apply to another, and this is part of why real estate agents are necessary.

Most state laws say that real estate agents have a "fiduciary" responsibility to their client. You hear that a lot, but what does it really mean? In short, it means they have a legislated responsibility to be trustworthy. Agents attempt to provide trustworthy advice based on experience and can tailor their advice to fit your particular deal, looking out for your interests. They aren't always right and will make sure you know that the final decision is yours.

And that's the point....the final decision is always yours. Weigh the advice properly, judge the source, and determine if they are actually qualified to provide advice on your particular sale or purchase -- which may be unique. Then, make your decision.

� December 2002 by RealEstate ABC

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