Legal Question in Real Estate Law in California

Re: Getting Out of a Property Sale

Your question omits a variety of key facts, and it raises two fundamental issues:

1. Have you, as your fiance's agent (or trustee, depending upon how your power of attorney is drafted), breached a duty of due care owed to your fiance? In other words, by signing a listing agreement which gives the agent half of the profits, have you violated the duty of due care which you owe to your fiance. (You owe this duty not because he is your fiance, but because you agreed to act on his behalf via the power of attorney).

2. Did the broker violate statutory or common law duties to you (or your fiance) by making an agreement regarding commission which could be construed to be unconscionable? This is a bizarre arrangement. The broker is now tantamount to your partner, which creates a much different duty on his/her part, as opposed to being your agent. The duties in both analyses are very high duties, but the analysis would be different.

Moreover, it is unclear how the 50% is to be calculated. Is it gross or net profit? And what if the sale breaks even, after deducting mortgage, etc.? Does that mean that the broker gets nothing?

If the agreement was procured by fraud, you may be entitled to rescind it on that basis. Your mistake may also provide a reasonable ground to rescind the agreement, though mistake is not always a valid ground.

A very unorthodox arrangement. I would have to do some research, but I would be inclined to wager that this arrangement, if it is as you set forth, is surely questionable, and perhaps unenforceable, and may even subject the broker to discipline.

Get yourself a good real estate litigator now. Delay could be costly. If you need to discuss the matter, please call or email. We are experienced litigators with extensive experience in real estate transactional disputes involving brokers.

Good luck.

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Re: Getting Out of a Property Sale

How are 'profits' from the sale to be measured?

This is an extremely weird arrangement, and I'm pretty confident there is some way to get out of it or to make it turn out to your advantage, but I can't imagine that any lawyer could give you the advice you need without a WHOLE LOT more facts.

For example, what if the highest offer received were so low that the sale would result in a loss? Would the broker be obligated to pay you 50% of your loss? Mathematically, that would be a justifiable result.

How about having a trusted friend buy the property at a price low enough so the profit is only $5? Then, the broker gets $2.50, and then the trusted friend sells it back to you and you re-list with an honest broker.

I'm not recommending this, of course; I'm just mentioning it as a theoretical possibility to emphasize how strange this arrangement is. You should probably contact the Department of Real Estate to see if this arrnagement is legal and if the broker is licensed.

Also, when acting as an attorney in fact, you owe your principal a high degree of care. Your acts so far have been careless -- you should have read this listing agreement carefully before signing.

Re: Getting Out of a Property Sale

I would call the California Department of Real Estate and discusss this issue with them first. They are the licensing authority for Brokers. Brokers owe a ficuciary duty to their clients just like attorney's do. Ordinarily brokers receive a percentage of a sale and not part of the profits. A deal where a broker gets half of the profits may not be legally enforcable, and may be a breach of the brokers fiduciary duty to you. Call the Department of Real Estate first to see if they can help you wiht this situation. You may find that this so-called broker is not even licensed, or they may help you to get out of this contract. I sure would like to see a copy of the listing agreement!