You may have had a real estate agent in the past say, "I'm not allowed to give legal advice, but…" And wondered where the discrepancy comes in and why the ruling on legalities versus real estate agents is so blurred. Well, it really shouldn't be. Lawyers, who are also real estate agents, can give legal advice but a real estate agent that is not a lawyer cannot. So where's the line on legal information or legal counsel?
Real estate agents can be extremely vulnerable when it comes to getting sued so saying the right thing and doing the right thing or not doing something is really a fine line that real estate agents and Realtors need to follow closely. Even the smallest mistake could end up costing a lot of money for the agent, tarnishing a reputation, or losing your license. Real estate agents can give basic advice on the property, construction information, materials, and current market conditions, but they can't give legal advice on how to make a decision on certain legal actions and this fine line can be blurred if the agent is not careful.
Each state has its own set of real estate laws and real estate agents help is not legally required for most transactions even though agents can help with many processes and responsibilities that border on legal action such as preparing the home purchase and sale contract. In some states, a lawyer is allowed to prepare these documents as well, perform a title search and close the deal without any help from a real estate agent, even though they may charge more.
Attorneys are paid by the hour, and this can be very expensive. Real estate agents charge a one-time listing fee or buyers commission, which they will receive once the deal closes. It's usually a set percentage of the sale price. As a buyer or seller going through an attorney could cost you a lot more depending on how much information you need and how often you use them.
So what's considered legal advice?
According to real estate law, no other individuals such as paralegals, law students, and real estate agents are legally permitted to give legal advice on a real estate law. Those that do are technically breaching ethical and legal provisions. Only lawyers are authorized to practice law. So what are agents and not allowed to give?
Real estate agents cannot explain potential legal outcomes of any dispute or lawsuit, they cannot evaluate legal issues and advise the client, they cannot file a lawsuit for you, they cannot make arguments in court on your behalf, and they cannot draft any legal documents including contracts. Any contracts or addendum's written up during the process have already been approved and authorized by the legal board for that state. They cannot redraft any additional documents.
Real estate agents that do any of these things risk losing their license, suffering fines, losing their potential commission, and even getting sued themselves.
So as long as the agent does not provide any legal information only general knowledge or public information, all parties should be in compliance. Real estate agents can pretty much answer anything a buyer or seller will want to know but once it gets into legalities or lawsuits, it's time to bring in a real estate attorney.