After the Purchase Contract (Contract) was entered into by the buyer and seller, intending to save some money, the parties decided they would not use a title company nor a traditional lender. The agents have been asked to draft an Addendum to the Contract providing for seller financing and eliminating the provisions addressing title insurance and the handling of escrow.
Can the agents represent the parties in the transaction consistent with the standard of care?
Both the buyer’s agent and the seller’s agent owe their respective clients a fiduciary duty to promote and protect their interests. A.A.C R4-28-1101(A). Seller finance transactions are complex even under normal circumstances because of the Dodd-Frank legislation and should at least be reviewed by counsel. Closing a transaction without a title commitment and without title insurance is a very high-risk proposition for the parties and the brokerage firms involved.
The agents should notify their respective clients to obtain independent legal counsel. If the parties refuse to hire counsel, it is recommended that the agents resign their agency roles in the transaction.