SubscribeAs The Market Cools, Lawyers Are Salivating
January 22, 2008
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 . . .
Comments
11 Responses to “As The Market Cools, Lawyers Are Salivating”
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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.
Toby
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!
But lawyers have to eat too!
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?
Mr. Little’s broker was just seen leaving a liquor store with a half-gallon of Jack Daniels
…and his attorney just bought a new Winnebago!
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!
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.
[...] 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). [...]
There are good and bad realtors, Lawyers and everything else. I believe in being ethical. I also had a bad experience and myself being in the business should have known better.I have been disapointed for the second time with a [NAME REDACTED] a real estate broker in CA, I worked with in the past and present. In my opinion I will not do business with her again nor recommend her to. I think what happens is people fall for ones business charm, but in fact that person just knows how to reel you in and not come through with what they promised and I do not do business like that, I gave her a second chance only because a business associate happend to be a friend of hers, but always remember business and friends are two different things. I later found out something happend with another agent when dealing at her new company. It all comes down to trying to get that comission. I also would stress to anyone to research as much information as possible when doing business with real estate agents and brokers and their company, it can become costly if you don’t. I wish you all good luck. In real estate word of mouth is everything so be truthful and tactful.
* Note from Kevin Boer, blog owner and Editor of 3OceansRealEstate.com on 2/12/2009: I have been contacted by [NAME REDACTED] who informed me that the above is slander and completely incorrect and may have been written by somebody who has been stalking her for several years. In the interest of freedom of speech, I am leaving the above mostly intact, less the name. In the interest of protecting possibly false accusations against an innocent party, and continuing the fight against internet trolls, I have redacted her name.
I don’t know if K. Pappas has mistaken the identity of [NAME REDACTED]* because the [NAME REDACTED]* I know is a very hard-working, ethical individual. I am in the real estate industry as well and I have worked directly with [NAME REDACTED]* on a few deals. I have seen her let go of a commission (a large commission at that) because of her ethics & concern for her client. She has earned my respect and loyalty and at a time of such darkness & greed that has surfaced in our industry, seeing a comment like this really bothers me. I think K, Pappas should address his/her concerns/personal issues directly, like a true professional, instead of blasting someone on the internet.
* Note from Kevin Boer, blog owner and Editor of 3OceansRealEstate.com on 2/12/2009: I have been contacted by [NAME REDACTED] who informed me that the comment above this one is slander and completely incorrect and may have been written by somebody who has been stalking her for several years. In the interest of freedom of speech, I am leaving the above mostly intact, less the name. In the interest of protecting possibly false accusations against an innocent party, and continuing the fight against internet trolls, I have redacted her name.