The answer is very likely YES; as in both.
If you are listing and selling short sales then your seller very likely needs not only you as a licensed agent to sell the real estate (and we recommend only the use of REALTORS in good standing with their local boards and MLS) but also the use of an attorney.
Why? Very simply you as the listing agent are inherently making recommendations to the seller about the outcome of his debt associated with his or her’s mortgage. During a short sale, you are drawing, delivering and recommending to the seller a legal conclusion and the impacts it may have on his obligations to the debt.
Most large mortgage banks such as Bank of America, Chase, Citi, GMAC & Wells Fargo are pursing the seller for the deficiency between the net to them during the sale and the amount owed by the homeowner. As the REALTOR you don’t want any part of suggesting to a homeowner that a short sale will resolve the situation.
What to do about it?
- Don’t create your own “special forms” or copy others to use in your seller’s short sales. This is strictly forbidden.
- Have the seller hire the attorney to do the “legal” work. While you focus on seller the home.
- Don’t try to sneak extra fees by the bank that you are not licensed to collect.
As most licensed agent know, lawyers are prohibited from receiving commission as part of a real estate transaction (unless the have a real estate license). Furthermore, most reputable lawyers don’t want to practice real estate. They simply want the best deal for the client (seller).
Below is information from the mandated Legal Update that most agents are required to take for MCE.
- The Bank Slayer
Brokers and the Unauthorized Practice of Law
Chapter 81 of the Government Code defines the practice of law and prohibits persons who are not licensed attorneys from practicing law.
TREC rules are clear on limitations that licensees must follow with respect to such matters.
TREC rules (22 TAC §537.11) state that when negotiating contracts binding the sale, exchange, option, lease or rental of any interest in real property, a real estate licensee shall use only those contract forms promulgated by TREC.
The only exceptions to the foregoing rule are:
- transactions in which the licensee is functioning solely as a principal, not as an agent;
- transactions in which a governmental agency requires a different form;
- transactions for which a contract form has been prepared by the property owner or prepared by an attorney and required by the property owner;
- transactions for which no form has been promulgated by TREC, and the licensee uses a form prepared by a Texas-licensed attorney and which is approved by the attorney for the particular kind of transaction involved.
The rule continues and provides that the licensee may NOT:
- practice law, offer, give nor attempt to give legal advice, directly or indirectly;
- act as a public conveyance;
- give advice or opinions as to the legal effect of any contracts or other such instruments;
- give opinions concerning the status or validity of title to real estate;
- attempt to prevent nor discourage any principal from employing a lawyer; and
- draw or prepare documents fixing and defining the legal rights of the principals to a transaction.
The foregoing does not limit the licensee’s fiduciary obligation to disclose all pertinent facts that are within the knowledge of the licensee, including such facts that might affect the status of or title to real estate. When completing real estate forms, the licensee may fill in only the blanks provided. The licensee may not add to or strike matter from the form except that the licensee may add factual statements and business details desired by the principals and may strike only matter that is desired by the principals and as is necessary to conform the instrument to the intent of the parties.
If there is a promulgated addendum, lease or other form that addresses a factual statement or business detail, the licensee must use that form to address the factual statement or business detail.
The rules do not prevent the licensee from explaining to the parties the meaning of the factual statements and business details contained as long as the licensee does not offer or give legal advice.
The rules also expressly state that when it appears that there are unusual matters involved in the transaction (which should be resolved by legal counsel before the instrument is executed) or that the instrument is to be acknowledged and filed for record, the licensee shall advise the principals that each should consult an attorney.
Finally, a licensee may not employ, directly or indirectly, an attorney nor pay for the services of an attorney to represent any principal to a real estate transaction in which the licensee is acting as an agent. The licensee may employ and pay for the services of an attorney to represent only the licensee in a real estate transaction, including preparation of the contract, agreement, or other legal instruments to be executed by the principals to the transactions.
It is interesting to note that the subject of the vast majority of litigation involving TREC forms has been the language inserted into special provisions or other blanks in the contract forms. A poorly drafted clause can lead to placing the licensee in a precarious position if the language inserted in special provisions or other blanks is the cause or source of the dispute.
