Broker pushing for small-deal process and templates?

November 13, 2025

by a searcher from The University of Chicago - Booth School of Business in Santa Cruz, CA, USA

Edit: retitled to clarify intent. Greatly appreciate the inputs! To clarify - I don't think the broker claiming to represent both sides is the key issue (I just ignore it...) I am working on a smallish deal (500K SDE) in which the broker is proposing what I assume is a main street deal process. They are the dominant broker in this small market, so I trust this is locally common on larger deals, even if it is not what I understand to be common elsewhere. - Brokers claim to represent buyer and seller. I am skeptical when brokers claim this, but in this case their behavior supports this. - They wish to use the CAR (CA Assoc of Realtors) standard purchase agreement template with addendums (CABB has a similar template as well) - Brokers draft initially, before review by the party's attorneys - No exclusivity in LOI. Intent is to draft and sign purchase agreement within 2 weeks, with no termination for seller, and loose conditions for termination by buyer. - Buyer paid earnest money. Obviously I prefer not to do this and show my faith through DD expenses. - Due diligence follows the purchase agreement. Based on my time in this community my instinct is to push back, but I also can appreciate a standardized process that sellers trust. I also imagine this lowers legal fees, and/or is less compatible with fixed fee ETA legal models. I of course realize the criticality of legal protection (and value the attorneys who contribute here!). I see this a question of "reducing process friction," not "saving legal expenses" Has anyone been in a deal that has followed this type of process, and what were the pros/cons of it? thanks!

Reply by an investor
from McGill University in San Diego, CA, USA

So many red flags I don't know where to start. I will list 4. There are more. Due diligence following the purchase agreement is the biggest red flag. You should never sign a binding purchase agreement before diligence is complete (or at least before major issues are surfaced and priced). That’s exactly how buyers end up inheriting undisclosed liabilities, tax issues, or operational landmines. In ETA, diligence precedes signing because it directly affects price, structure, and post-close risk allocation Broker “representing both sides” = conflict of interest. They’re financially incentivized to get the deal done, not to protect you. They earn their commission at closing, not by protecting you in reps & warranties. No exclusivity = no leverage. If you sign a purchase agreement without exclusivity, the seller can shop your signed deal to other buyers. You’re committing resources (legal, diligence, lender engagement) with no protection. The “intent to draft within two weeks” means you’re racing to close while the seller holds all the cards. In normal LMM or ETA-style deals, the LOI gives exclusivity for 90 days precisely to prevent this. Earnest money pre-agreement is upside-down. In a proper ETA deal: Earnest money (or deposit) comes after an LOI with exclusivity, and usually goes to escrow when the purchase agreement is signed. Here, you’re fronting money before you’ve confirmed anything - financials, legal issues, contracts, tax exposure, etc. It’s a setup for getting trapped in a bad deal or losing your deposit in a dispute. If I were in your shoes... I would insist on a standard ETA LOI with exclusivity... Use your own attorney to draft the purchase agreement (never the broker’s)... Make due diligence a precondition to closing, not an afterthought... And if the broker balks, politely say: “I’m happy to use your template as a reference, but we’ll need to add standard protections required by SBA lenders and my counsel.”

Reply by a professional
from American University in Irvine, CA, USA

Josh: This is not standard, and it may be that your broker is a transformed real estate broker now trying to do business deals. For one thing, there is an inherent conflict of interest in the Broker representing both sides, and in the context of M&A, the conflict can be much more troublesome than in residential real estate, where the CAR forms are more standardized and there is a whole body of people who review them. I represented a Buyer in a deal in Central California earlier this year, and he lost the deal and paid significantly higher costs due to the broker's insistence that he use a CAR form, and that we force all of our edits into this form. The problem is that the CAR form does not contain industry standard representations, warranties and conditions which always are used in the purchase and sale of companies. I do not recommend that anyone use this as their Purchase Agreement. If you would like to discuss further, I'm happy to speak with you.

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