When purchasing a home, people will often hire a broker to assist them with locating a property and an attorney to represent their interests in the property transaction. The roles of a buyer’s broker and an attorney may overlap and are both important, thus, it may be tempting for buyers to seek out a relationship in which a person will dually represent them as a buyer’s broker and as their attorney, however, entering into such an arrangement may not adequately represent their interests and is rife with ethical violations.
- A Buyer’s Real Estate Broker (or Agent) and Buyer’s Attorney May Have Conflicting Interests
To understand how one’s dual representation as a buyer’s broker and attorney may not adequately represent their clients’ interests and create ethical violations, it is important to understand their roles in property transactions.
- A Buyer’s Real Estate Broker (or Agent)
Education: Real estate brokers and real estate agents are very similar. Both must earn real estate licensure and have fulfilled the state requirements to sell property; however, real estate brokers have completed education beyond the minimum required for licensure to sell property and has passed the brokerage exam. In Massachusetts, attorneys who are in good standing may be issued a broker’s license by simply applying, without completing any of the typical requirements.
Real estate agents who are members of the National Association of Realtors are referred to as REALTORS®. As part of their membership, they are required to abide by a legally enforceable code of ethics which protects clients and upholds a sense of professionalism.
Real estate brokers may have real estate agents who work for them, although when people refer to real estate brokers, they are typically referring to the person who is helping them locate a property to purchase.
Role: Real estate brokers and agents guide buyer’s through the initial processes of purchasing a property. They help them determine what types of properties suit their needs, locate properties in which they may be interested, answer and research basic questions about listings, and negotiate the purchase of the property. In doing so, they will draft the buyer’s offer to purchase the property.
Interests: Most real estate agents and brokers are paid a pre-negotiated commission upon the completion of the sale of a property. Although the commission (usually 5% of the purchase price) is typically paid by the seller, it is usually split among the buyer and sellers’ brokerage firms, a portion of which is given to the agents. For these reasons, the agent’s interest is in closing the deal for the highest amount to secure a commission.
- A Buyer’s Attorney
Education: A buyer’s attorney had earned a bachelor’s degree, a juris doctorate degree, and has passed the bar exam to be licensed to practice law. Lawyers are trained to deal with the unique (and often complex) issues which may arise in the purchase of property. Thus they have unique specialized professional skills which enable them to draft or revise the documents necessary to facilitate the transaction and to protect the interests of their client.
In addition to being licensed to practice law, attorneys often join real estate-focused professional organizations such as the Real Estate Bar Associations (“REBA”), which require that their members abide by strict ethical and practice standards.
Role: The purchase of a home is typically one of the most significant purchases a person makes in their lifetime. Buyer’s attorneys work with brokers to facilitate the transaction. From drafting transaction documents to include their clients’ desired terms, to arranging for their financing, to searching and ensuring title, attorneys look out for their clients’ best interests and mitigate the risk of future harms. Their advice is invaluable to their clients. In fact, they are considered to be so important in real estate transactions that Massachusetts require their services to close the transaction.
Interests: The buyer’s attorney is interested in zealously advocating for their client. While this typically includes closing the transaction, in some cases it may mean advising their client to walk away from the purchase.
- Dually Representing a Buyer as Their Broker and their Attorney in the Same Transaction Presents Several Conflicts of Interest
Representing a buyer as their broker and attorney presents several potential ethical conflicts. Thus, REBA forbids individuals from dually representing a party as their attorney and their broker in the same real estate transaction.
Attorneys are required to “zealously [represent their clients’ interests] within the bounds of the law.” Thus, their representation of their client cannot be tainted by any “competing interests.”
Massachusetts Professional Rule of Conduct 1.8 prohibits attorneys from entering into business transactions with their clients unless certain conditions are satisfied, including that the transaction is fair and equitable, that the client has had the opportunity to seek counsel (other than the potential broker-attorney), and that the client consents to the business arrangement in writing. Violations of Rule 1.8 include situations in which an attorney’s obligation to protect the interests of their client counter their personal interests in the transaction.
An attorney may not place their interests above those of their client. Massachusetts Professional Rule of Conduct Rule 1.7(b) governs conflicts of interest arising from situations in which an attorney has a personal (or financial) interest that may affect their professional judgment. If an attorney’s personal interests are reasonably likely to adversely affect their ability to affect their representation of their client, they must decline representing the client even if the client waives the potential conflict of interest. Thus, an attorney’s representation of a buyer as their broker and their attorney may create a conflict of interest which cannot be waived by the client even if they consented to the representation.
A buyer’s broker and attorney are likely to have competing interests. Because buyers’ brokers are typically paid by commission upon the completion of the real estate transaction, they are interested in facilitating the sale of the property and closing the deal. On the contrary, buyers’ attorneys are hired by their clients to protect their interests in the course of the transaction. In some situations, this may mean that it is in the best interest of the client to walk away from the transaction even though their doing so may prevent an individual who is dually representing a buyer as a broker and their attorney from receiving a commission. For these reasons, dually representing a client as an attorney and a broker may create competing allegiances which may impact their ability to adequately represent their client.
The roles of a buyer’s broker and a buyer’s attorney are similar, but different. When the parties work together, however, they can establish the foundation for a smooth transaction.
Massachusetts has an abundance of real estate brokers and attorneys. Weighing the risks associated with individuals dually representing clients as their attorney and their broker, buyers should seek separate parties to represent them in their real estate transaction.
- Redmond Law attorneys work with a number of excellent Realtors whom we can recommend and who we work very well with to protect all of the buyer and seller’s interests and to best serve them with professionals in each aspect of the deal.
If you have any questions about this topic, or would like recommendations for trusted, professional Realtors, J. Redmond Law is happy to help. Please contact now for a complementary consultation.
https://www.boston.com/realestate/news/blogs/renow/2012/03/can_an_attorney.htmlhttps://www.realtor.com/advice/whats-difference-real-estate-salesperson-broker/.  Id.  Id.  Id.  Id.  Id.  Real Estate Bar Assoc. (REBA) v. Nat. Estate Infor. Services (NREIS), 459 Mass. App. Ct. 512, 553 (2010).  Mass. R. Prof. C. 1.3.  REBA Ethical Standard No. 4.  Mass. R. Prof. C. 1.3.  Commonwealth v. Downey, 65 Mass. App. Ct. 547, 549-50 (2006); See Mass. R. Prof. C. 1.7.  Mass. R. Prof. C. 1.8, See Matter of Lake, 702 N.E.2d 1145, 1147 (Mass. 1998); Goldman v. Kane, 3 Mass. App. Ct. 336, 340-41 (1975).  See Klubock, “Bar Counsel Comments, Entering into Business Transactions with Clients,” 13 M.L.W. 1176 (May 20, 1985).  See Matter of Pike, 563 N.E.2d 219, 222 (Mass. 1990).  Mass. R. Prof. C. 1.7(b).  Mass. R. Prof. C. 1.7, cmt. .  See White Tower Mgt. Corp. v. Taglino, 19 N.E.2d 700, 701 (Mass. 1939).