What Are The Differences Between a Real Estate Lawyer and a Realtor?

Real estate law can be a complex and confusing area, with many different players involved in the buying and selling of property. As a real estate attorney in Texas, I work with realtors and other real estate attorneys regularly. One question that I am asked from time to time – usually by someone who is just breaking into the real estate game –  is: what are the main differences between a real estate lawyer and a realtor, and how do I know when I need one vs. when I need the other? There are many significant differences between the two, and they fulfill vastly different roles. In this article I will try to explain the most basic differences and give you some tips on dealing with each one. A realtor is a licensed intermediary who acts as a go-between, connecting buyers and sellers in a real estate transaction. A realtor’s primary role when representing a buyer is to help the buyer locate and view properties, generally through use of the Multiple Listing Service (MLS), which is something like a “proprietary Google for realtors,” as well as writing offers and negotiating the buyers’ side of any offers. There are many services that have aimed to replace realtors and their closely-guarded access to the MLS in this regard, such as Zillow, Redfin, and others. These alternatives have met with mixed success. A realtor’s primary role when representing a seller is primarily as a marketer. The realtor will assist with various phases of the marketing of a property, including suggesting pricing for a property, arranging photography, videography, or staging of a property, listing a property on the proprietary MLS, negotiating the sellers’ side of any offers, arranging tours and open houses, and more. Realtors often have a good understanding of the local real estate market and are often able to provide valuable advice on pricing, marketing strategies, and the buying or selling process. However, when engaging with a realtor on either the buy-side or the sell side, it behooves you to remember that realtors are generally paid by commission. Accordingly, they have a financial interest in getting a deal closed, and may be less likely to advise you to walk away from a bad deal. Here are a few pitfalls to be wary of when considering a realtor:

• Realtors are not ethically prohibited from undertaking a “dual representation.” A “dual representation” means representing both buyer and seller in the same transaction. If this seems like a conflict of interest to you, you would be correct. Real estate lawyers, who are subject to much stricter ethical standards, are flatly prohibited from a “dual representation” based on this conflict of interest. Needless to say, we recommend against consenting to your realtor entering a “dual representation.”
• A realtor’s commission is always negotiable. Many realtors will present a commission as “fixed at 3%” but this is not the case. A realtor who really wants to work with you will generally be willing to reduce their commission. Fees tend to be especially negotiable on the sell-side, where nearly 100% of the effort and time is involved in the initial photography/listing.
• While realtors are often very knowledgeable about the real estate market, they do not have actual legal training with regard to contract law or other legal topics. Accordingly, you should exercise caution when the contract departs too much from the “standard form” that realtors work with. In other words, when a sophisticated counterparty with a custom contract comes to play, a realtor cannot help you.
• The quality of realtors is uneven. It generally takes 1 to 4 months to become licensed as a realtor in Texas, and a degree is not required. Compared to the 7 years (4 years undergraduate degree + 3 years doctoral degree) required for admission to the bar, it’s much, much easier to become a realtor. While there are some very competent realtors in the market, there are also some who are… well, not. Choose very carefully.

A real estate lawyer, on the other hand, is a legal professional who focuses on the laws and regulations related to real estate. They may advise on commercial transactions and development as well as zoning, easement, or regulatory matter. They may deal with complex mineral rights transactions or transactions involving large amounts of land with potential challenges. A real estate lawyer is usually not involved in standard residential transactions, due to the standardized nature of such transactions and the general absence of legal issues, although exceptions do exist. In the context of a real estate transaction, the real estate lawyer may provide legal advice to clients on the meaning and consequence of legal documents, as well as counsel his clients on business strategy and negotiation strategy. In the context of a higher-value purchase, the real estate purchase contract’s representations, warranties, closing conditions, covenants, deliverables, etc. will all generally be heavily negotiated. In virtually all cases, it is necessary for this negotiation to flow through attorneys. Here are a few pitfalls to consider when engaging a real estate attorney:

• Real estate lawyers can be expensive. While realtors charge a percentage commission payable if the deal closes, an attorney may cost between $200 to $1,500 per hour, depending on the attorney’s level of skill and the demand for his or her time. And the attorney’s bill will be due whether the deal closes or falls through or gets put on hold or anything else. If you do not have a clear vision of what you want the attorney to do, you may end up with a large legal bill. You certainly do not want to bring an attorney with you every time you want to look at a possible house to buy. Bringing the attorney in at the right time – not too early, not too late – is key.
• Attorneys can be very specialized – be sure you find one with real estate experience. If you are doing a commercial real estate development deal, you do not want to hire a personal injury attorney! If you have a dispute over an easement brewing, you don’t want someone who mainly practices criminal defense! Before engaging the attorney, it is a good idea to ask them what their primary practice area(s) are. Be sure to get someone whose experience and skillset matches your problem.
• Attorneys can sometimes make the process adversarial – not every person on the other side will appreciate talking with an attorney, and it can be seen as an escalation or a hostile act to “lawyer up.” Nonetheless, it is important to protect yourself.

A real estate lawyer may also be involved with disputes related to the real estate purchase contract, such as title disputes, zoning issues, and mortgage problems as well as the termination, modification, or extension of the real estate purchase contract (and under what circumstances such termination, modification, or extension is permitted or required). They may also assist with the related compliance issues. While realtors and real estate lawyers may work together on a real estate transaction, their roles and responsibilities are distinct. This was mentioned above, but it’s important enough to repeat here: while realtors are knowledgeable about the real estate market, they are not trained in the law. They cannot provide legal advice (and you wouldn’t want them to!) Although realtors and real estate lawyers may both play a role in the real estate industry, they serve different purposes and have distinct areas of expertise. If you are buying or selling a property, it is important to understand the role of each professional and how they can help you achieve your goals. If you need legal advice and representation in a real estate transaction, please contact us for a consultation. On the other hand, if you need help with the marketing and sale of a property, we would be happy to make an introduction to a competent realtor.