Something called “transaction brokerage” has become the norm in Florida in recent years. What it means is that no one gets the full fiduciary duties from agents that used to be the norm.
Typically, it doesn’t make a lot of difference, but sometimes it makes all the difference in the world.
I was recently consulted by a seventy-four year old woman. While she is as sharp as anyone I know, and actually brilliant in her chosen field (nursing), she knows very little about money and property.
Her husband had passed away and the property his well-known local business stood on was the last asset of his estate, being her last chance to guarantee her own retirement and make it possible to continue helping her family.
She actually told the agent who listed the property for sale that she didn’t know anything about money or selling real estate and she was depending on him to protect her. He guided her in executing a listing contract under which he represented her, with full fiduciary responsibility to do just what she asked for, i.e, advise and protect her.
A relatively short time later, the listing agent produced a buyer, who was willing to pay the asking price for the property, but needed seller financing to close. There were no other agents involved, so the agent put a document in front of the seller, disclosing that he was changing from her “single” agent, to a transaction broker, who no longer owed her full fiduciary duties. She signed it.
He then proceeded to negotiate a deal under which most of the purchase price (everything except for a $100,000 down payment) would be paid by a seller mortgage, amortized over 30 years, with a 20 year balloon. She signed it. Then she started having second thoughts.
When I first spoke to her, it became apparent that she was deeply confused about a couple of basic elements of the deal. For example, she thought she would get the entire $100,000 down at closing, when, in fact, a nearly $42,000 commission had to be paid first. With the other closing costs, she would only end up with much less than half the down payment at closing.
She also didn’t understand that the balloon was paid in 20 years. What good is a big payment in 20 years to a 74 year old? It just didn’t make any sense to me. Finally, she was also accepting monthly payments smaller that the rental value of the property.
To be fair, all this information was disclosed to her in writing, and she signed that too, yet she still didn’t understand. I don’t know if it was explained too quickly for her to follow or the fact that she was from another country, with some very different business customs. For example, she explained to me how she felt sure that nothing she had signed was truly final because it wasn’t notarized.
To make a long story short, we renegotiated the deal with another $28,000 to the seller at closing and monthly payments of $1,400 more than before.
As the seller told me, it is great to have someone truly on your side, her “guardian angel.”
Article by Tom Brodersen, Esq.