There are two parties to a transaction:

  • A buyer; and
  • A seller.

We spend most of our time training clients regarding the duties we owe to both buyer and seller. Often we forget the third wheel in this relationship. Us!

Every business owes a duty of care to those it deals with to take all reasonable steps to avoid harm that it could reasonably foresee. This duty is owed to both the seller and the buyer. In other words, as a professional, we must always act in a way that prevents either party from suffering damage.

Every business owes a fiduciary duty to the people who pay us. That fiduciary duty requires us to act in the best interest of our client. As a real estate agent, buyer’s agent, stock and station agent or business agent, we generally get paid by the seller and our fiduciary duty is owed to that person. As a strata manager, we must always act in our owner’s corporations best interest.

All of us do business to make a profit! If you are not doing it to make profit, ultimately, you will go broke. And therein lies our conundrum! When faced with the conflict between our own interest and our client’s interest, which one comes first?

This is not unique to the property industry. As a solicitor, I must always act in my client’s best interest. Sometimes, the client’s best interest might be to settle the matter quickly without indulging ourselves with the legal process. This, however, is not always in the best interest of the legal practice. The legal practice may benefit more from protracting the business to ensure that they squeeze as much juice out of the economic lemon as possible before finding a settlement. Yes, many solicitors do that! This is not the policy of Leverage Solicitors because we cannot contribute to success if we protract your legal battles. Nonetheless, this conundrum is often at the top of mind.

When a real estate agent or buyer’s agent negotiates, they have two completely different functions:

  • The real estate agent is interested in obtaining the best price for their vendor;
  • The buyer’s agent is interested in obtaining the lowest price for their purchaser.

If the parties are too far apart, neither will obtain their commission unless they condition their clients to compromise.

This is a pivotal emotional position. The real estate agent needs to convince their vendor that they need to go lower whilst the buyer’s agent has to convince the purchaser to go higher. In these circumstances, the interest of the deal becomes more important than that of the parties. When a deal gets close, the question is whether the agent will put their own self-interest in front of their client’s interest when gauging their behaviour.

This is by no means a criticism of the parties. It is merely a comment on the complexities of what we deal with on daily basis as members of the property industry. We work in an environment where there are so many hidden issues that we don’t face the complexities we are confronted with. The question is, when you are faced with a complex issue, and this complex issue means that advising your client to take a particular action will prevent you from earning a commission, are you brave enough to give that advice which is not in your favour?

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.