Marty Ummel feels she paid too much for her house. So do millions of other people who bought at the peak of the housing boom.
What makes Ms. Ummel different is that she is suing her agent, saying it was all his fault.
Ms. Ummel claims that the agent hid the information that similar homes in the neighborhood were selling for less because he feared she would back out and he would lose his $30,000 commission.
The contract I signed for a buyers agent, way back in 1994, I guaranteed to purchase my home through him (breach was $200) and his side was fiduciary duty to me.
Thus if it’s proven an agent was bound to the principle but acted in self interest, I’d say it’s a good thing to enforce the relationship between a retained agent/principle that I’m not sure this profession has embedded in its ethos.
That said, I’m not sure the home owners are throwing even more money away!
A home sale is 6% commission of the sale, split between agents. So if a home agent is greedy by $25K than it yields only $750.00 for the agent, which is really nothing over all (a $400K home is $12K per agent). There were many going into this field in the boom for the “easy money” career path, so while temptations maybe greater than with other agent/principle are more resilient, much could be much more incompetence than malice.
However, another agent/principle field maybe able to capitalize on another’s incompetence/greed. I doubt the homeowner will be able to recapture nearly what they think they’re entitled. Housing is still a free market with the what it’ll bear determining the price, in five years, historically the price should return, but they maybe able to gain $1500 of the gain the Realtor made have made on the home by not bargaining effectively, for a mere $3000 in legal fees (I guess the plaintiff could take moral comfort that the Realtor also paid a near equal amount legal fees). The house equity will eventually return, but those fees are gone for good.
Some fights may not be worth fighting (sorry attorneys, I know you need to eat as well, but logically it looks as if yours is the only profession that wins in this deal).
“Some fights may not be worth fighting” —KAR
True—and something that I as a lawyer stand ready to tell people when they think about suing.
_ _ _ _ _
The Wall Street Journal recently carried an article describing how homebuilders used concealed rebates to prop up the prices of houses they were selling. You’d agree on a $350,000 purchase price, put $400,000 in the official documents, and receive a $50,000 side payment from a firm affiliated with the builder (who presumably booked it as a selling expense). Result: the builder gets a phony $400,000 “comparable” for use in deceiving other homebuyers. If this doesn’t count as fraud, it ought to.
Was this “her” agent, or was it the seller’s agent?
Caveat emptor.
Whe I bought my house, the agent represented and owed his fiduciary duty to, the seller. As such, the broker owed the duty to the seller to get the best price, not to the buyer. At that time a “buyer’s broker” had to represent himself as such and disclose that fact to the prospective seller at the outset, when the prospective buyer was looking at the house.
The main question that will be raised will be:
a) did you know this was the price when you signed the contract?
b) did you agree to this price when you signed the contract at closing?
if yes to both, case dismissed.
Bre’r Rabbit [#3]: Buyers had what they thought were their own brokers. But those brokers were paid by and loyal to the seller—a fact that was technically disclosed to, but often misunderstood by, the buyer. For background, see http://en.wikipedia.org/wiki/Sub-agent.
The current trend (as I understand it) is for the buyer’s broker, although paid by the seller, to have fiduciary duties to the buyer.
Jim [#5]: You might like this Dilbert cartoon about full-service securities brokerage:
WEASELTON: I’m Bob Weaselton, your full-service stockbroker. There are two ways we can go here. Option one: I act as if brokers know which stocks are better than others. Then I’ll earn your trust by comparing your portfolio to misleading benchmarks. But I prefer a more direct approach. Option two: I sell you whatever garbage earns me the biggest commission.
DILBERT: Would you do me a favor and lie to me?
WEASELTON: Nice haircut.
Hey, that’s how our broker acted! He bought high and sold low. Idiot.
Which is why when he went to another agency, we instructed our new broker to sell everything and put them in our bank’s CD plan. At least now we earn interst.
Irenaeus correctly defined what I understood in ’94.
I signed a contract with a buyers agent, the agreement expired in three months, I gave a $200 check that was returned at purchase and he was honorable and worth paying the $200 when it came to making an offer. He still in business and one I’d recommend as an honorable representation to his trade.
However, I’m not confident listening to some Realtors talk if the meaning of “fiduciary duty” was well understood. I can see where these home owner has a gut feeling that their Realtor who was contracted as a Buyer Agent was not as honorable, especially at the cusp (the easy money dried up long before the crash), but I think it’ll be nearly impossible prove, unlike a true free market, the products are not identical. I also doubt one can prove anything an overcharge greater than 5% because the market is dynamic, thus homes sold two weeks before and two weeks after would be relevant, but these angry homeowners are probably upset by the cumulative losses, that is under the assumption of risk with any investment (stocks can go up but they can also loss value).
Where I think the crooks are is in the lending. I listen to a mortgage broker push an ARM during while working on a charity service project together and he did do something criminal by suggesting inflation of equity was guaranteed!
Irenaeus #2, that was fraud on the lender, who based the loan on an appraisal that did did not account for the $50k seller concession.
KAR, you are right, Option ARMs were horribly misrepresented. they are appropriate only for a very few cases. I have documented that effective interest rate on the deferred interest can exceed 200%, when compared to available fixed rate. But what did we expect? There are no education or training requirements for people who arrange loans. And when lenders dangle $20-25k per loan to young, unqualified people, any thought of ethics vanishes. Same problem with real estate agents. Too much money for people who are actually practicing law.
A bit off-topic, but I wanted to reply to #8 libraryjim:
Your broker may or may not be an “idiot” (and as Christians, I think using such demeaning labels for folks is problematic) — but to be honest, YOU were the one who bought high and sold low. You had to agree to your broker’s trades, didn’t you? (If he executed trades without your authorization, that would be unethical.) Granted brokers may give bad advice often, but you don’t have to take it. Do your due diligence and research your options and historical prices if you’re going to use a broker. I have refused a lot of advice and also insisted on some of my own ideas, and my portfolio balance is better for it. But I’ve also gotten some very good and timely advice, so it’s been a two-way street.
Karen, the stocks were in a ‘trust’ left by my wife’s father. Until the broker left the firm, we had very little say in the way the account was handled, as he was not hired by us, and could not be ‘fired’ by us. It was a very complicated matter, and our suggestions on the account were routinely ignored. When we tried to ‘go over his head’, my mother-in-law, who really likes this guy (he handled her portfolio, too) would step in.
Once he quit, the rules changed and we took advantage of that as quickly as we could.
(re: the above message, if you have ever seen “the Gilmore Girls”, my wife and her mother’s relationship was similar to that of Emily Gilmore and her daugther, Lorelei (Rory’s mom). In fact, we found the program to be very realistic in the relationship aspects. one of the reasons I didn’t like to watch it that much. Curious that my wife did.)
Hey libraryjim, if you happen to come back to this, thanks for your clarification. I understand and I’m sorry I made such assumptions.
Karen,
🙂