Sellers Lawyer Steals Deal

[Matthew Wright]

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.

[Jessica Zolotorofe]

That is horrible. And horribly unethical!

[Account Closed]

@Matthew Wright    Sounds like the lawyer represented his client very well.  If he give more money than you would have it really does not matter if he is part of the deal.

This is extreme common.

Why do you think he asked his lawyer?

[Matthew Wright]

Yeah I know, Im not surprised either, to be honest.

[Matthew Wright]

Jessica, though I'm not shocked, I certainly agree its unethical, one way or another.

[Mike Reynolds]

At the very least you should have been included in the process if nothing else just to see if you would go higher than those other guys.

[Jessica Zolotorofe]

The lawyer actually has a duty not to do what he did. Our job is only to represent a client on the legal side of the deal. This was overstepping and if there is personal gain, or god forbid a commission of any kind earned... major violation and the ethics committee should probably hear about it.

[Mike Cumbie]

I do have to say it is not unethical by any means. The lawyer has a responsibility to their principal (The seller). If say it was worth 100K and you offered 20K and they took it to his lawyer he better tell him to get more. Refer him to an agent to see how close to retail he can get, and if he absolutely has to sell now "I'll give you 60K and I am stealing it from you." 

That is actually more ethical than letting someone else strip 40-80K from their client.

Just my 2 cents and good luck!

[Wayne Brooks]

The OP's "speculation" is the attorney is participating as a buyer, or making some kind of fee.  Probably not true, but even if it is, he's still doing the best for his client.  Even the OP called it a "deal of a lifetime", which means he was paying Way below what it was worth.

[Matthew Wright]

I was wondering best approach to shedding light on it, if in fact what he did is a violation, even in the slightest bit. Like Mike said, at the least should allow me to give highest and best, that would in fact be in his clients best interest.

[Mike Cumbie]

So @Jessica Zolotorofe,

As an attorney if a little old lady showed up who was your client and she talked to some guy off a flyer and he told her he would give her 20 cents on the dollar for her house you would tell her to go for it?

I am surprised but I will default to you as the attorney

[Max T.]

If the outcome was better for his client (the seller) how is it unethical? 

[Robert Whitelaw]

Any lawyers want to chime in with suggestions on how to prevent this or at least minimize it in the future? Get things written perhaps? If this seller had walked in with a contract to review instead of a verbal agreement, would the circumstances have likely been different or effected the outcome?

In this case, I know I would have created a document outlining the agreement between the seller and myself.

R

[Matthew Wright]

Most importantly, his lawyer told him he should take no less than X so I was willing to pay X (which is more than what we agreed upon the first time we spoke, before he consulted with his attorney). And thats fine, he needed enough money to move on and into a new home, which is understandable, I dont want the guy to be in a bad spot financially. So it would have been a win-win for both of us even at the number his attorney insisted on, the amount in which I was still willing to pay.  Even after agreeing to the new price, his attorney brought the deal to someone else, not allowing me to go even higher. That to me its unethical, considering I could have given an impressive highest and best, but they'll never know. Id consider that doing your client a great disservice 

[Matthew Wright]

Robert, I did have P&S filled out, with everything but price when we first met, but he wouldn't sign with out consulting, which is understandable.

[John Thedford]

If the seller went to his attorney for advice, he got it. It might not be the advice the buyer wanted, but if in the client's best interest I am not sure he did anything wrong. Report it to the board if you believe there was an unethical or illegal act and let them sort it out. 

[John Thedford]

@Matthew Wright

You didn't have a deal if the contract had not been executed. 

[Matthew Wright]

I don't disagree with anyone's input, all valid points. Though, I do think if he was solely looking out for his clients best interest, he would urge the seller to allow me to give him my best offer.

[Jessica Zolotorofe]

Ok, I AM an attorney, and it is NOT a lawyer's duty or obligation to meddle in business deals and absolutely not their job or their right to shop to other investors. ASSUMING the facts are what was posted above, it is absolutely a violation of the ethics rules. What if the client lost this deal because of the lawyer's delay in doing his job and the other investors passed on the deal? A lawyer cannot act as a broker in a deal he is the lawyer to. Not even a question that this whole scenario is not  allowed. If I ever tried to pull that I would be out of a job quick. 

[Cal R.]

@Jessica Zolotorofe which ethical rule do you think was violated? 

[Account Closed]

@Jessica Zolotorofe     I have called and asked two Texas lawyers and they completely disagree with you.

The owner asked the lawyer about the transaction.  They did not request a document to be drafted.  As the original post stated the client would have been taking pennies on the dollar if the lawyer had not stepped in.

As long as nothing is hidden there is no violation.

Both Texas lawyers absolutely agree that they would have been obligated to tell the person it was not a good deal if they knew that was the case.  That alone would have almost certainly killed the deal.  They also agree a Texas lawyer is authorized to receive commission from real estate transactions.

Now if the lawyer was representing the buyer and did that, it could lead to disbarment.

Are you claiming that the client was harmed because they received more money?  Are you suggesting that client did not understand that the lawyer was receiving compensation (if they were)?

[Jessica Zolotorofe]

@Account Closed there are rules about candor and fairness to opposing parties, respect for the rights of third parties to a transaction, dealing with unrepresented persons, conflicts of interest, prohibitions on self-dealing, etc. Again, I'm assuming all of the facts presented are accurate. 

[Mike Cumbie]

@Jessica Zolotorofe,

My interest is purely in discussion and continued education so it is not "attacking in any manner". The OP had stated the seller did not sign an agreement so it was strictly a verbal discussion between them. The seller went to his lawyer and provided the offer (verbally) to the lawyer, there was nothing on paper. The lawyer would then not be "shopping anything". Of course assuming the above is all accurate if a client came to you with a discussion about a very low priced verbal offer would your recommendation be to take it then?

[Jessica Zolotorofe]

@Account Closed, I'm not sure why we are talking about Texas, but check out TRELA Sec 1101 and then call BOTH of those lawyers back and see if they might want to reconsider their blanket answer...in fact, I do a decent amount of Texas work. If I'm missing something, I'd like to know for future reference. Can you share the names of the two lawyers you spoke to in the last half hr so I can get some additional insight?

[Jessica Zolotorofe]

@Mike Cumbie It's not my job to. Business terms are outside the realm of what attorneys are supposed to be doing. If I was asked, I might say the offer sounds low and I would tell the client he may want go back and try to do better, but that it is wholly the client's decision (if it lost him the deal, I would never want that to be able to be attributed to me) and I absolutely would never go start calling other investors and get that involved in the business deal, and DEFINITELY never take a piece myself... ever. If a client  said I will take no less than X and he got an offer for X, now my job is to paper it, not to perform a market analysis and offer the deal to other clients. 

[Account Closed]

@Jessica Zolotorofe   I am not sure there was self dealing.  Of course, that would be a huge problem.

In cases I have seen it simply happens like this.

Lawyer : "This price seems very low.  I think I might know an investor who would pay you more."

Client : "I am in a really big hurry and don't want to lose this deal."

Lawyer : "How long do you have until you have to get back with them?"

Client : "I am not sure.  Can you call the investor today?"

If that investor offers say 20% more then the person who made the first offer will be lucky to get a call back.

I have also seen....

Lawyer : "Hell.  I will give you more than that."

If the lawyer says that, it is normally all over but the crying for the person that made the original offer.