In a perfect world, a Florida real estate transaction would involve the buyer and their lawyer, the seller and their lawyer, a representative from the mortgage lender, and a title insurance agent. However, in reality, the buyer’s lawyer often takes on multiple roles, such as issuing title insurance, handling the lender’s documents, and preparing the seller’s closing documents. This can be complex and sometimes leads to conflicts of interest. The lawyer is supposed to act in the best interest of the buyer, but also has responsibilities to the title insurance company and the lender. This can create difficult situations, such as when a buyer wants to purchase a property in “as is” condition despite issues with the property. 1) The attorney has to tell the lender if something could make it hard for the buyer to get a loan. But they still have to keep the buyer’s secrets and be loyal to them.
2) The attorney has to tell the lender about any tricks to inflate the purchase price, but they still have to keep the buyer’s secrets and be loyal to them.
3) The attorney might need to tell the lender if the buyer loses their job before closing, but they still have to keep the buyer’s secrets and be loyal to them.
4) The attorney might need to stop the closing and tell the lender if they see sneaky money passing between the buyer and seller, but they still have to keep the buyer’s secrets and be loyal to them.
5) The attorney has to figure out a way to handle a problem with the house’s title without messing up the financing for the buyer, the lender, and the title company.
6) The attorney has to figure out a way for the buyer to still get the loan, even if they won’t be living in the house like they said they would. 7) The buyer’s attorney should disclose the unlicensed unit to the lender, even if it affects the transaction.
8) There is a conflict of interest for the attorney, as they represent both the buyer and the title company.
9) The attorney should disclose the potential tax lien to the title insurance company and the lender to avoid any issues.
10) The buyer’s attorney should advise the buyer to seek independent legal advice due to the potential conflict of interest with the brother-in-law’s malpractice lawsuit. If an attorney represents a buyer in a real estate deal, they have a duty to act in the best interest of the buyer. This means they can’t share the buyer’s confidential information with anyone else, even if it’s the lender they’re also working for. They can’t just stop representing the buyer to avoid this conflict, either. It’s a tricky situation, which is why it’s best for attorneys to only represent one client in a transaction. In Florida, many attorneys who work with real estate also sell title insurance. To do this, they have to prove that theyâre qualified to examine property titles and handle money for real estate transactions. Once approved, they can issue title insurance commitments and policies. They work for the title insurance company and have to follow its rules. If thereâs a problem with the title, they canât issue a policy unless they get permission from the company. When a buyerâs lawyer issues a title insurance commitment for a company they work for, they have a duty to serve both the buyer and the company. If the policy has exceptions or requirements, it can hurt the buyer while helping the company. The lawyer represents both the buyer and the seller when creating the policy, but their interests can conflict. If the buyer makes a claim on the policy, it puts the lawyer in a tough spot because they represent both the buyer and the company. In some states, lawyers can sell title insurance to their clients, but they have to be careful about conflicts of interest. In Arkansas, lawyers can represent both the client and the title insurance company, but they have to disclose any financial interest in the transaction. In New York, lawyers can’t refer their clients to a title company in which they have an interest.
In recent years, institutional lenders have been appointing lawyers and title companies as “closing agents” for mortgage transactions. These agents handle the closing documents, prepare settlement statements, arrange for document recording, and disburse the lender’s money at the closing. Institutional loan officers don’t usually go to closings – they’re done by approved settlement agents. The settlement agents don’t get paid by the lender, but they can be held responsible if the lender’s documents aren’t done right. The term “settlement agent” started being used in the 1970s when out-of-state banks didn’t want to pay for their own lawyers. They used the buyer’s lawyer or title company as their settlement agent for free. This was good for the bank because they got someone to protect their interests without paying for it. It was good for the lawyer because they could get recommended for more business from that bank. In simple terms, the real estate buyer didn’t really get any benefits from the deal. They had to pay their attorney to act as the lender’s agent, and didn’t get a good deal on title insurance. It’s also now illegal for a real estate agent to represent both the buyer and seller at the same time. This is because it’s not fair for one person to represent two people with conflicting interests. An old saying compares representing different parties in a legal matter to trying to dance at two weddings at the same time. This is because it’s difficult to fully serve the interests of both parties. In the past, it was thought that as long as everyone knew about the potential conflict and agreed to it, it was okay for a lawyer to represent both a buyer and a title insurance company. But now, the rules for lawyers say that the lawyer must truly believe they can represent both parties fairly before getting their consent. Just getting consent isn’t enough anymore. This is because getting consent doesn’t fix the problem of the lawyer having a conflict of interest. It just means everyone has agreed to the potential problem. Consensual or victimless crimes are still crimes. The issue here is about the ethics of the lawyer, not the client. It’s not good for one lawyer to represent multiple clients with conflicting interests. The real problem is the lawyer’s commitment to being ethical. Disclosure is just revealing conflicts that already exist, not fixing them. It’s important to have clear and simple professional relationships in real estate to build trust. Some legal cases show that even if someone agrees to something, it might not make it okay. It’s the law in Florida for real estate agents to disclose all the people they represent. This rule is based on national bar association rules. Some older bar association opinions also support this idea. Remember, express consent might not always be effective. Douglas C. Kaplan has been a lawyer for 50 years and served in the U.S. Army. He has been a city prosecutor and attorney for a real estate board for many years. This column is written on behalf of a legal section.
Source: https://www.floridabar.org/the-florida-bar-journal/servants-of-a-masterful-conflict/
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