HE'S BEING SUED. WHY IS HE SURPRISED? I'M NOT

By Dallas Realtor Bill Cherry

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