3 Oceans Real Estate, A Boutique Real Estate Brokerage Serving the San Francisco Bay Area header image 2

As The Market Cools, Lawyers Are Salivating

Chris Iverson, Realtor

January 22nd, 2008 · 9 Comments

Well, it was just a matter of time before someone who bought at the top of the market sued their agent because they paid too much for their house. In this article in today’s New York Times, we learn of the sad story of the Ummels who bought a retirement home in Carlsbad, CA to be near their children.

The Ummels worked with a Buyer’s Agent who had a fiduciary responsibility to assist them in finding and purchasing their home. They looked for quite a while, fired one agent and then canceled contracts on two other homes that they had written offers on. I’m sure nerves were getting a little frayed for all concerned by the time they finally bought their home.

“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.”

Where things get interesting, and their agent, Mike Little, makes the rest of us look bad is stated further on in the article:

“Mr. Little also worked as a mortgage broker. The Ummels say he encouraged them to get their loan through him. Mr. Little ordered an appraisal of the house but did not respond to the couple’s requests to see it, the suit charges.

A few days after the couple moved in, in August 2005, they got a flier on their door from another realty agent. It showed a house up the street had just sold for $105,000 less than theirs, even though it was the same size.

Then they finally got their appraisal, which told them the house up the street was not only cheaper but had a pool. Another flier in early October mentioned a house down the street that was the same size and closed the same day as the Ummels’ but went for $175,000 less.

The Ummels accuse Mr. Little not only of withholding information but of exaggerating the virtues of their house to push them into a deal.

Ms. Ummel said in her deposition that Mr. Little had told them “many times that it was a very good buy.”

The mortgage brokerage that funded the loan, and the appraisal company both settled out of court, but Mr. Little fights on. I bounced this off of fellow contributor Eric Trailer, and we saw a couple of red flags waving.

1) Mr. Little acted as the agent and loan broker. This is legal, but as noted in the article, he now has twice the motivation to get the deal done.

2) He urged them to get their loan through him - again legal, but the ice in sunny Carlsbad is getting thinner.

3) Mr. Little’s appraiser found the house to be worth $1,150,000 to $1,200,000 in the summer of 2005, the Ummels’ appraiser valued the house at $1,050,000. This is about 10-15%, which is pretty significant, but within the realm of possibilities. I’m getting nervous if I’m Mr. Little’s broker however.

4) Mr. Little didn’t share his appraisal the Ummels. (His broker is drinking heavily at this point.)

Long story somewhat less long . . . The Ummels (plaintiffs) are suing because they didn’t get what they felt was appropriate representation from their agent. This is what many consumers expect of Realtors, and books like Freakonomics don’t help.

One of the things we contributors to 3Oceans preach is Transparency in Real Estate. We share the information and tools that we use with our clients, provide data from unbiased sources like Altos Research, and don’t try to do loans and sell houses at the same time.

End of rant, let the comments fly!

Thanks for reading . . .

Tags: , , , , , ,
Possibly related posts

Tags: * Type of Content · Analysis · Bad Realtors · Business of real estate · Buyer and seller tips · Buyers · Consumer · Crooked realtors · Deceptive realtors · Freakonomics · Good realtors · Industry · Market updates · Mortgages · Realtors who give the business a bad name · Sleazy realtors · Transparency · Types of realtors · War stories

9 responses so far ↓

  • 1 Toby & Sadie // Jan 22, 2008 at 8:04 pm

    One thing I always want in a real estate transaction is a win-win situation, I get paid and my buyers are happy with how I serviced them throughout the transaction.
    Mr. Little is doing none of us hard-working honest agents a favor by his responses in the article and if it wasn’t for the possible ramifications across the country, I’d love to see him made an example of.
    I always like that legal and ethics line. You know it might be legal, but if I can’t sleep at night, then I walk away from it. Am I going to lose a few deals? Yep. But, I can sleep well at night knowing that I’ve given my clients my best every single day.

  • 2 Kevin Boer, Broker Owner, 3 Oceans Real Estate, Inc. () // Jan 22, 2008 at 8:07 pm

    Chris, ya beat me to it! I was going to write an article about this too!

    At least Mr. Little wasn’t also the home inspector, termite guy, and escrow officer!

  • 3 Dominique // Jan 22, 2008 at 10:29 pm

    But lawyers have to eat too!

  • 4 Chris Iverson, Realtor // Jan 23, 2008 at 7:43 am

    I figured this was too good to pass up.

    For me, the highlight is Mr. Little’s description of his client as ” a nutcase”. Now, to be fair, she did picket the broker’s office.

    How great would that be, a picket line in front of a real estate office?

  • 5 Phil Hoover // Jan 23, 2008 at 4:53 pm

    Mr. Little’s broker was just seen leaving a liquor store with a half-gallon of Jack Daniels :(

  • 6 Kevin Boer, Broker Owner, 3 Oceans Real Estate, Inc. () // Jan 23, 2008 at 7:03 pm

    …and his attorney just bought a new Winnebago!

  • 7 Tish // Jan 26, 2008 at 4:03 pm

    This is interesting - real estate agents going against other real estate agents. When people within their own industry don’t trust or support one another, it gives reason to question. I guess that is the real reason I have bought 32 homes and 25 of them have been without a real estate agent. Today, with all of the search engines, we don’t need agents especially ones like the people listed here - those who dog their own. What kind of a profession is that. Real estate agents are soon to be like travel agents - on their way out. Internet prevail……I don’t want to work with any group that can’t support each other. I found that out about 25 houses ago!

  • 8 Christopher // Jan 31, 2008 at 10:00 am

    To counter Tish’s point, it is not the industry, it is the individual. So what is next? Because there are crooked lawyers, we go to the net to get info to try our own cases? We go to WebMD to perform surgery on ourselves because of medical insurance/pharmaceutical fraud committed by doctors? It is more about ethics than industry.

  • 9 As The Market Slows, Lawyers are Salivating, Part 2 | 3 Oceans Real Estate, A Boutique Real Estate Brokerage Serving the San Francisco Bay Area // Apr 14, 2008 at 2:23 pm

    [...] Some of you will remember my post on the lawsuit in Southern California where the buyers of a home were suing their agent because they felt they overpaid, and the agent had acted to hide that information from them (Refresher available here). [...]

Leave a Comment