You may have read in the news about attorneys who stole their clients' money, lost their license and went to jail. Yes, managing escrow money gets attorneys in trouble the most often. However, there are many other red flags that you should watch out for when selecting legal representation for your real estate transaction. Here is a list of the top five real estate attorney no-no's that go beyond theft, and which every client should be mindful of when seeking representation.
- Dual Agent Representation Restriction: Clients need to be sure that their attorney is only acting as their attorney when seeking representation. In fact, attorneys are ethically precluded from representing both parties in a real estate transaction. The buyer and the seller must be independently represented or, instead, represent themselves (this is called pro se) in the transaction. An attorney cannot even have his legal fee paid for by the other side of a transaction (the buyer paying the seller's attorney is not permitted).
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Today, transactional lawyers should be using informed consent letters throughout a real estate transaction. In fact, the real value of an attorney in a real estate transaction is to provide the client with the requisite know-how to make smart choices (e.g., should a buyer close with escrow if their walk-through discovers water in the basement; or should a buyer purchase a house without a certificate of occupancy; or should a seller permit a pre-possession agreement with the purchaser; or should a seller accept an attorney escrow check rather than a bank check in accepting payment). In every possible scenario there is not a one-size-fits-all right answer that works across the board and, instead, clients' decisions should be modified based upon their unique circumstances once they are advised of and understand risk. Still further, the best transactional attorneys not only advise their clients about the law, but also provide guidance about the best practice in business in order to empower their clients to make smart choices. This way, a top attorney's job is to help his client make money.
Adapted from this Dan's Papers article.