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Sellers Lawyer Steals Deal
Anyone ever have a great deal (verbal) going with a seller and have the seller consult their attorney about the upcoming transaction and have the attorney steal the deal? I did and it isnt a good feeling. Its what I would consider the deal of a lifetime. The property was off market and he responded to one of my mailers, the seller was extremely enthusiastic about selling me the property for pennies on the dollar, until his lawyer found out and started offering the property to other investors he knows. And of course the sellers going to listen to every word his lawyer says. I'm thinking the lawyer is going to be part of the deal on the purchase side.
@Account Closed both of your scenarios feel problematic, but again, to each his own. I would suggest a client shop around themselves, if they choose, and understanding the risk that they could lose this deal, or hook them up with a good broker maybe even, but to actually make the calls to investors who are most likely also my clients, or even worse, take a piece of the deal myself... I wouldn't do it. I don't feel like my intentions would be purely in favor of my client. There's a reason a listing broker that's also a lawyer can't also act as the lawyer or a non-listing broker can't give half his or her commission to the lawyer in the deal in most states.
I have received a letter from a Nigerian Prince which would like to deposit his family fortune I to my account to get it out of the country. Can you write it up for me while I send over the account info. :)
Mike Cumbie I would certainly tell you to be careful and double and triple check because it didn't sound legitimate, but that's back to my duty to protect a client, not make them a few extra bucks MAYBE while definitely putting their deal on this line and while also benefiting myself or some other investor client. I also wouldn't say, hold on, let me call some other people and see if they want your account number instead, and maybe they'll throw me a few bucks. They're only going to steal half your money, not all of it, and then I'll look like a hero to everyone!
That probably wasn't the most on point example there, but I appreciate where you were trying to go.
And Mike Cumbie no hard feelings or "attacks", I enjoy being challenged and having meaningful conversations, which this has been (maybe minus your last post 😉)
This is really a NY/Northeast article, but still some good food for thought.
Originally posted by @Matthew Wright:
Jessica, though I'm not shocked, I certainly agree its unethical, one way or another.
No it is the opposite of unethical. The lawyer has a fiduciary duty to his client, not to you some stranger.
"An attorney's financial benefit cannot cloud his professional judgment." <-This is a poor support for this preclusion.
An attorney acting as a broker, who is motivated to close a transaction in order to get paid a commission is the same unethical attorney motivated to drag out his legal services and run up a bunch of hours in the course of advising their client whether the deal closed or not.
Joseph B. Davisson I agree! They are both unethical. And there are rules prohibiting both.
Well that was fun. Thank you, to the attorneys for their professional input.
Matthew. Your common sense should tell you that there are attorneys in many states weighing in here. If you feel that you were wronged you can take it to the local bar association or department of state and see what they say. Perhaps the attorney in question has a reputation for crossing the line and they should be aware of this action. In any event you realize that this is a real estate site and not the court for judgement. If you throw this out to attorneys here you will get a battle royale without resolution and just a lot of frustration. Lawyers can argue this past the New Year. They love to debate. It's their nature to do so. IMHO. As a friend. Can we just move on and you can work locally with the local enforcers that could offer you something more constructive resolution.
Thats exactly what I had in mind, my last post was intended to be a closing statement.
In Texas, there is no absolute preclusion against an attorney acting as attorney and broker in the same transaction. An attorney can act as a broker and an attorney in the same transaction provided:
1.) attorney can protect his client's legal interests even if attorney loses the commission should the transaction fail to close, and
2.) attorney discloses the conflict of interest to the client, and
3.) the client consents to the attorney acting as broker and attorney
In the original scenario, advising the seller not to sell at 1/5 market value, and helping him get a better deal is certainly not an ethical violation. It is good advice and guidance. I would question a client's capacity if they came to me considering a sale for "pennies on dollar". That is part of our job. Also part of our job is to protect our clients from doing stupid stuff. In the vast majority of circumstances, this would qualify as stupid. The same applies if my client was going to enter into a finance arrangement at an interest rate far greater than what I know he could get from one of my banking clients. I am going to put this client in touch with one of my banking clients when I know they will give him a better deal. I am not going to ignore ways to protect my client and his assets.
Also, you might want to double check the TRELA because attorneys are exempt form much of it. Brokers can't split commission with an attorney and an attorney can't sponsor salespeople, but otherwise, mostly exempt.
#2 Contractors Contributor
- Severna Park, MD
Sounds to me the lawyer looked out for the best interests of their client . I would expect my attorney to do the same . Look out for me .
No, he didnt look out for his best interest, if he did he would have had his client ask me for my highest and best, instead he did the total opposite and is keeping the deal for himself and probably paying less than I would have.
#2 Contractors Contributor
- Severna Park, MD
Thats only speculation .
The only part that is speculation is what he probably will pay, other than that its fact.
Originally posted by @Matthew Wright:
No, he didnt look out for his best interest, if he did he would have had his client ask me for my highest and best, instead he did the total opposite and is keeping the deal for himself and probably paying less than I would have.
You bragged about in one of the first posts in this thread that you had a deal in place for pennies on the dollar with this seller. If they were my client, I would have also advised them to not continue to negotiate with you either as it would appear you were the one acting unethically. When people look to take advantage of people, those who have fidicuary duties will cut you out of the possibility of taking advantage of their clients. I would not see it to be in my clients best interest to look to deal with someone looking to equity strip my client. From what little I can ascertain this lawyer seems very ethical to me and is full filling his fiduciary duty to his client. You seem to just be upset because you were unable to take advantage of an uninformed seller. Now that they are informed it seems like you are crying about spilt milk. I'm glad we have strict laws in place in Maryland. When you equity strip someone here you become liable for I believe repaying 82% of that amount back to the original seller.
I certainly wasnt bragging, that's nothing to brag about, it was just a really good deal. And I'm not crying, although it did suck losing that kind of a deal. but time to move on. I will continue to stand by the fact that, after all is said and done, he wasn't ensuring he got his client the most out of the deal, other wise HE WOULD HAVE ASKED FOR HIGHEST AND BEST, PERIOD. Could you tell me more about the "equity strip" scenario? How does one determine you're stripping equity, when a house is falling apart and it takes a great deal of work and effort as an investor to re position a property. If I wasnt buying high equity property I wouldn't do it, who flips houses for free?
@Matthew Wright Sorry that happened but the reality is not all deals work out. Even when you have a legally binding written contract some deals will still fall apart. Just today I had a buyer cancel a purchase that we had a contract on. Learn what you can from the experience.
If your attorney did that, well that is a serious problem. As far as you know what the sellers attorney did was exactly what the client wanted.
By the way, until that property has settled and transferred to a new owner, it is not dead. I had a deal that took almost a year to conclude. Yes there was an attorney representing the seller and yes there was another buyer. Ultimately the deal came back to us.
@Jessica Zolotorofe you are assuming facts not in evidence.
You said "I expressly said that my opinion was strictly based upon the facts provided above, being that the lawyer unilterally shopped a client's deal"
- Firstly there was no deal as you know real estate contracts must be in writing.
- Second you do not know the attorney acted unilaterally.
- Third you don't know what the client asked of the attorney.
- Fourth, in some states, MD for example an attorney is able to work as a broker.
I'm not sure why we are talking about Texas,
Well you are certainly happy to respond to a deal in Maine even though you are a NJ lawyer. You are also happy use a NY example to support you position. Yet a Texas Lawyers viewpoint is not valid?
You stated your position very strongly without allowing for exceptions, yet have based your position on many assumptions.
it is NOT a lawyer's duty or obligation to meddle in business deals
Your rhetoric aside, it certainly is your duty if the client has come to you for advice on those business deals. From what you have written, you certainly don't represent what I want in an attorney.
Could you tell me more about the "equity strip" scenario?
Yes I would like to know more about that myself. Are you referring to MDs PHIPA law?
How does one determine you're stripping equity,
You can't. It is a bogus concept made up by liberals. It is a scary slippery slope to think that the government gets to decide what is a "fair deal"
Ned, right. At the end of the day, it is no big deal. Its the name of the game and I will learn from it.
Well, that was an unnecessary personal attack. Like Mike said, this was a friendly discussion and we are all entitled to our opinions, but not personal attacks. Texas law was irrelevant initially because the issue was in Maine. I brought in other law strictly as "FOOD FOR THOUGHT" and expressly provided that it was out of state law as to not be misleading, and only after general conversation was opened up. I don't necessarily agree with the initial poster's position or actions, I also don't know that I necessarily buy that all of the facts are as they were presented, and I do believe that there was a whole lot of speculation. That being said, IF exactly what was reported is what happened, varying state laws aside, I would not view what was ALLEGEDLY done as ethical. And while I may gently encourage a client to think about the transaction, it is always a client's decision, never mine, to go try and call other investors. To go even a step further, the very name of this thread would indicate that the lawyer "stole" the deal, so no, I would never do that nor do I believe it to be ethical, again, assuming that was what happened. In fact, if another investor client did decide to bid on the deal, I would recuse myself from representation because of the obvious conflict of interest. Texas law, Maine law, NY and NJ law (and I'm not sure about MD, but I would imagine it has to be the same as to this point), all prohibit an interested attorney from acting as counsel, and any ethical attorney who did have even a potential conflict of interest, whether it be self-interest or third-party conflict, should not continue on as the attorney. I hold my clients' success at the absolute highest level, and I have a lot of exceptionally successful clients. I make sure that they are surrounded by great accountants and brokers and financial advisors who do their jobs effectively, which in turn makes mine easier to do well. That's all I have to say about this now, there are so many things wrong with your post that it otherwise doesn't really warrant more specific response, but I thank everyone else for the open discussion and wish everyone very happy holidays.
Originally posted by @Ned Carey:
Could you tell me more about the "equity strip" scenario?Yes I would like to know more about that myself. Are you referring to MDs PHIPA law?
How does one determine you're stripping equity,You can't. It is a bogus concept made up by liberals. It is a scary slippery slope to think that the government gets to decide what is a "fair deal"
@Ned Carey the law in MD pertains mostly to those in distressed situations. (ie, no marketing to preforeclosures.) But there are other areas of law that overlap. It mostly comes down to the concept of informed consent though. Licensed agents are the most at risk of an informed consent argument against them, but it can happen to other investors as well. But if we abide by the part of the law that binds agents to treat the public fairly and honestly, even if we arnt an agent, then we tend to not get ourselves in too much trouble.
@Matthew Wright for equity stripping. You can google it and get much better explanations than how I can explain it...but there are two main types. One type is simply referring to stripping your own asset of it's equity, like a cash out refinance. That was not the type I am referring to. Not every state has equity stripping laws yours may or may not.
Wow, this is an interesting discussion. Just for fun, I looked up TRELA Sec 101, which @Jessica Zolotorofe suggested, because I'm curious by nature. I'm not a lawyer, but I can read, and according to this definition, among the list of definitions for a 'broker' of real estate, it lists:
"procures or assists in procuring a prospect to effect the sale, exchange, or lease of real estate;"
I'm not a lawyer but it sounds like the lawyer met this definition and therefore acted as a 'broker'. So, that begs the question, "Does this lawyer have a license to broker real estate?" Is a license required to broker real estate? Depending on the answers to these questions, one might conclude that the law was indeed broken. But I'm not a lawyer, so don't listen to me.
Perhaps it all hinges on whether the lawyer received a "commission or other valuable consideration" for this service? Isn't the lawyer's client paying him for his services? Was the lawyer just doing his a 'client' a favor, pro bono? Are they buddies or what? Hmmm. What would Perry Mason do?
It seams unethical, Matthew Wright but if you know the seller, you are also his potential client, the question is, what would you do if you were the lawyer and such a sweet deal is right in front of you? Would you let $40k just go by like that? In this market is kill or be killed, unfair but true!.