Finding out whose interests coincide in a real estate transaction is a mystery worthy of Sherlock Holmes. As a sampler, try this true-and-false quiz:
1. The interest of buyers and sellers are opposed.
2. When a buyer hires an attorney or title company to conduct settlement they represent the buyer.
3. The interests of sellere and their brokers are identical.
The last two are false. Why they are false demonstrates the need for all parties in a real estate transction to be both cautious and vigilant.
In the case of the attorney or title company handling the settlement, neither works exclusively for the party who hires them. At best they are agents of the settlement process. They can collect fees not only from the buyer and seller but also for such title insurance as they may sell. Frequently settlement services are sold in a package often do not include charges to the second party. in cases where the buyer retains settlement services, sellers should insist that all costs of settlement must be paid by the buyer.
Unlike settlement providers brokers have a clear agency obligation to whomever hires them - typically a seller. However, the interests of brokers and sellers may calsh at three points.
First, brokers have a fair and understanable interest in obtaining the best employment contract possible. As in any other negotiating situattiion there is an adversary relationship here. Sellers must understand that all terms of a listing agreement are negotiable, including the type of contract (open, exclusive agency, or exclusive right to sell), listing perios period, and rate of commiddion.
Second, to earn a commission brokers must produce a buyer who is "ready willing, and able." Many listing agreements and contract forms effectively define this phrase as meaning when a sellera nd buyer complete a contract. This obligates a seller to pay a commission even if a home is not sold because the buyerdefaults. Sellers should rquire that commission can only be paid fron the collected proceeds of the sale.
Third, in some cases the ultimate in terests of sellers and brokers may be opposed. Brokers are paid a commiddion based on the gross slaes price of a home. Yet such prices may not represent the greatest net benefit to the seller when all factors are considered.
Robert Ringer, in his book, "Winning Trhrough Intimidation, "explains how he collected hundreds of thousands of dollars from real estate sales as a broker, needed an attorney because his interestts were often different fron those of his clients.
Because of the inherent conflicts found in real estate, sellers should consider the use of an attorney. Attorneys are not absolutely necessary for real estate transaction and, in many cases, competent brokers can reduce or eliminate specific legal expenses. It may be prudent, however, for sellers to retain a lawyer to review listing, sales, and settlement documents before signing. Indeed, the code of ethics of the National Association of Realtors requires brokers to "recommend that legal counsel be obtained when the interest of any party to the transaction requires it."
Peter G. Miller teaches the course "How to Sell Your Own Home - With or Without a Broker" through the Consumer information Institute here.