An interesting article showed up today. "Feeling Misled on Home Price, Buyers Sue Agent," by David Streitfeld of the New York Times.
In Carlsbad, California, Mrs. Marty Ummel has filed suit claiming that she was misled by the real estate agent who was representing her. She says the agent knew similar homes in the neighborhood were selling for less, but he didn't tell her because he felt she may back out of the deal. If she did, Mrs. Ummel went on to say in her petition, he would loose about $30,000 in commissions.
Many real estate agents, including me, as well as any number of litigators feel confident that Ms. Ummel's claim will be the first of many. In fact, we've been expecting it.
And how many may well be determined by what success, if any, she has when a decision is reached in her North County Superior Court trial. It begins this Monday.
Those who want to point a finger at the cause can stick it in the eye of our own industry that, somehow, decided that when we are being paid a percentage of the sales price, we can be representing either the seller or the buyer. Now we have seller's agents, buyer's agents and a new thing called "dual-agency."
Since I brokered the Garden of Eden to Adam and Eve for Yahweh thousands of years ago, real estate brokers, by definition, always represented the seller. One had to jump through logic hoops to conclude otherwise. And any argument to the contrary is and always will be weak, as long as the agent is being paid from the proceeds of the sale.
Nevertheless, real estate people got steamrollered, rolled over and played dead, and consequently finally accepted that there is dual agency.
Mr. Streitfeld believes this, too. He says, "Agents representing buyers rarely had the opportunity to make mistakes during the last real estate boom, in the late 1980s, because the job hardly existed then. For decades, residential transactions almost always involved brokers who, whatever assistance they gave the buyer, legally represented only the seller."
Mike Little, the agent who is the defendant, also worked as a mortgage broker, and he arranged their financing. And while he was at it, he's the one who offered to hire the appraiser whose job it was to evaluate the proposed purchase price.
And to add fuel to the fire of the $1.2 million purchase, the owner of the home that Mr. and Mrs. Ummel bought is also a licensed real estate agent.
The new way is not always the best way. In my view, real estate brokers and agents should have only one piece of the puzzle: representing the seller as agent or sub-agent in the sale of his property. That does not include appraising, brokering loans, acting as the notary, selling the homeowners policy and on and on.
What do you think? If you are an agent, do you think you now have some exposure similar to Mr. Little's?
Copyright 2008 - William S. Cherry
All rights reserved
Bill,
In Pennsylvania where Buyer's Agency is practiced, if followed "ethically" there are no issues. The Buyer's Agent must work in order to achieve the best scenario for my Client...The Buyer, period! When practicing Buyer's Agency for me...it is all about the Buyer.
Where we still have the gray area of dual agency.....well that is a slipper slope I prefer not to practice....and have only twice in 9 years. Both time each party agreed to use me and in both instances I was the Listing Agent first. I am not a fan of dual agency, however it is done by many in this Industry where allowed.
I predict if this case goes the full length without outside settlement, the agent will lose.
Thanks to each of you for your thoughts and comments.
In defense of dual agency, that worked just fine for at least a hundred years. I've never stopped doing it, and I don't plan to unless it becomes illegal. I have never been sued and never been threatened, and it's because I do it ethically and everyone knows in advance what part I play and why. Forty-three years, now, knock on wood.
Billycherry
Bill, I like this case. I am a strong proponent of AGENCY for real estate licensees and mortgage brokers. I act as both and I believe in DUAL AGENCY because it would be a disservice to my listing client if I (or someone in my office) could not sell their property. I believe in dual agency because ALL PARTICIPANTS deserve and need to be represented.
I like this case because I have always maintained that AGENCY IS A PROTECTION FOR THE CLIENT(S) giving them the opportunity to seek redress for the actions of self-dealing "agents." If it can be proved that this agent did in fact withhold pertinent information then they have a good cause of action.
I will be watching. Thanks for bringing it to our attention.
Bill Roberts
Bill and Others--
The problem in business today is trying to keep yourself from having legal fees, even if you are 100% sure you're right.
Lawyers have taught Americans that they should beat their chests, threaten and fight anytime something doesn't go their way. Lawyers used to act as go-betweens with the purpose of getting the problem worked out in advance of pleadings, depositions, discovery and court time.
So until or unless that approach returns, I don't personally think it makes any sense at all to walk the tight rope of danger.
In the case of dual agency, if the buyer wants personal representation, I believe he should find the representative he likes and pay his fee with his own check and from his own bank account. Contemporaneously, the listing agent should reduce the listing fee by 1/2.
In my own personal case, if someone doesn't think I can or should represent both sides, then it's fine with me, but interestingly that has never happened to me.
Billycherry
Bill, I think that I share your opinion of today's lawyers and I am not trying to throw some business their way. But that said, I feel very strongly about agency being a protection for clients against deeds of commission and omission by an agent.
I act as a mortgage broker in California under my license as a real estate broker. Because I do loans this way my clients are protected by my agency with them. If I don't act in their best interest I can be sued.
At the same time we have mortgage brokers here that are licensed under the Department of Corporations. They do not have an agency relationship with the borrower. The borrower is a customer, not a client. They don't have the same protections that they would if I made the loan for them.
Agency is my hot button right now.
Bill Roberts
Bill
You point out a total insanity of California law/interpretation.
Miss Joanie
That's an excellent comment. Too many with licenses represent themselves first and their client second...or at least that let it look as though they do.
Billycherry