Suing your real-estate agent

[wiegie]

Unhappy home buyer, feeling misled on price, sues agent

By DAVID STREITFELD

THE NEW YORK TIMES

 

CARLSBAD, Calif. -- Marty Ummel believes she paid too much for her house. So do millions of other people who bought at the peak of the housing boom.

 

What makes Ummel different is that she is suing her agent, saying it was all his fault.

 

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.

 

Real estate lawyers and brokers say the case, which goes to trial in North County Superior Court on Monday, is likely to be the first of many in which regretful or resentful buyers seek redress from the agents who found them a home and arranged its purchase.

 

"When your house appreciates $100,000 in the first six months, you're not quite as concerned that maybe the valuation was $25,000 or $50,000 off," said Clifford Horner of the law firm Horner & Singer. "But when your house goes down, you ask: 'Who might have led me astray here?' "

 

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. The long boom that began in the late 1990s put an end to that one-sided world. As prices spiked, buyer's agents and brokers became popular as sounding boards, advisers and negotiators. The National Association of Realtors estimates they are now involved in two-thirds of all residential purchases.

 

That makes this the first housing collapse in which large numbers of buyers had a real estate professional explicitly looking after their interests. The Ummel case poses the question: In a relationship built on trust, where promises are rarely written down and where -- as in this case -- there is no signed contract, what are the exact obligations of these representatives in guiding their clients through a sizzling market?

 

"Agents have a lot of fiduciary duties, but they don't make money unless they close the sale," said Joel Ruben, a real estate lawyer in Manhattan Beach, Calif. "In an inflated market, there are built-in temptations to cut corners."

 

The defendant in the Ummel case is Mike Little, a veteran agent with ReMax Associates. He will argue that Marty Ummel, who brought the case with her husband, Vernon, is trying to shift the blame for the couple's own failures of research and due diligence.

 

"They simply didn't do what is expected of a knowledgeable, sophisticated buyer, and are now looking for someone other than themselves to take responsibility," Roger Holtsclaw, an agent who was hired by Little as an expert witness, said in a court deposition.

 

Horner, the lawyer, said valuation is a tricky area for brokers.

 

"Brokers aren't appraisers," said Horner, one of the writers of a guide to suing brokers. "They have no obligation to opine about value. But once they do, it becomes a gray area whether it's puffery or a misstatement of a known fact."

 

Most people who made a bad real estate deal might wince and move on, but people who know Marty Ummel describe her as unusually determined. She spent a year picketing ReMax offices on weekends.

 

Vernon Ummel, an administrator at Dominican University, gave her his permission to pursue the case, on one condition: "Don't tell me how much the legal fees are." So far, the bills come to $75,000, more than Marty Ummel's annual salary as a fundraiser at California State University-San Marcos.

 

"I do not think I'm obsessive-compulsive, but I am 114 pounds of absolute perseverance," Marty Ummel said.

What I find sort of interesting in this case is the part that I bolded above. From my point of view, the primary reason that buyer's agents even have a reason to exist at all is because they bring their expertise of the real-estate market with them. But now it seems that this agent's defense is that the buyers should bring with them their own expertise. What gives? (Other than the fact that this case is a perfect example of the conflicts-of-interest inherent with the whole real-estate agent industry that I am always babbling on about?)

[billay]

IIRC the agent in question also did the appraisal, which ne never showed to them until after closing. So they should have been more insistent on seeing it, but a buyers agent has no business doing appraisals where his own commission will be influenced by it.

 

That being said, anybody who bought a house in the last year is going to be disappointed.

[Beaumont]

I would imagine cases like this are hard to prove. But if you look at it purely from a legal standpoint, I think there is no question that a buyer's agent owes a duty of good faith, loyalty and candor to their client and cannot mislead them as to valuation or stay silent when they have important information that should be considered by the buyer ...

[billay]

I loved the agents argument that the pool that comes with the house down the street (for $150,000 less) didn't actually add value to that house because some people don't like that sort of thing. I'm going to go to a car dealership today and demand the base price for a top of the line car because I really don't care for leather seats, CD players, GPS navigation, surroundsound...

[The Holy Roller]

I would imagine cases like this are hard to prove. But if you look at it purely from a legal standpoint, I think there is no question that a buyer's agent owes a duty of good faith, loyalty and candor to their client and cannot mislead them as to valuation or stay silent when they have important information that should be considered by the buyer ...

 

Absolutely.

[whomper]

I have to assume that this was the first house that this buyers agent showed these people otherwise I am surprised that they didnt realize what other houses in the neighborhood were going for. I also wish they said how much they overpaid compared to the other houses. If it was 100Gs I would say wow. If its 20 Gs Id say I would like it explained if there were any improvements or updates that may have warranted a slightly higher price then the other houses. You do owe it to a client to give them a heads up if they may be grossly overpaying. It is very difficult to tell people what they should do with their money though. The flip side to this is when a realtor suggests that a seller should lower a price if a house is lingering on the market and not showing much promise. If a realtor made that suggestion the torches would be blazing. A person is can be a liscensed appraiser and Realtor/ Broker. I am not sure who appraised this home but the buyer certainly would have based her decision on that as well. I always advise clients that I work with to look on their own as well. Go to open houses. Check the papers. 4 or 6 eyes are better then 2. The couple I worked with this summer are great friends of mine. With every house a client I am working with shows big interest in I give them a print out of the sales history. I also send many different listings from the same town so they can see various prices in regards to each houses particulars. This realtor no doubt could have been looking the other way while his buyer overpaid I just would like a few questions answered as I listed above

[billay]

I believe the agent appraised the house at 1.2 million. A house in the same neighborhood, with the same floor plan, sold for $150K less.

[nuke'em ttg]

Realtors are overpaid bloodsuckinleaches

[Perchoutofwater]

I loved the agents argument that the pool that comes with the house down the street (for $150,000 less) didn't actually add value to that house because some people don't like that sort of thing.

 

Ever owned a pool? They tend to be money pits, as not only are you constantly buying chemicals, but you are also having to constantly fix or replace things like pool sweeps, filter cartridges, pump motors, etc... On top of that with energy prices as high as they are today you are looking at adding about $150-$200 a month to your electric bill just to run the pump. If you happen to have a heater you will only heat the pool until you get your first gas bill, and then you will realize a health club membership is a whole hell of a lot cheaper. In addition, a pool raises the cost of your insurance due to liability issues. Both me and my wife grew up with pools, and our current home has a pool, but we bought the house in spite of the pool, not because of it. If I didn't think my kids would raise hell, I'd back a dump truck up to ours and fill it in. If we don't move again once the kids start driving, I more than likely will fill it in.

[whomper]

I believe the agent appraised the house at 1.2 million. A house in the same neighborhood, with the same floor plan, sold for $150K less.

 

 

So she paid a little over 10% more. I am just curious if there was any improvements to the home she bought compared to the others. Floor plan is one thing. Updates are another. I dont understand the agent appraised situation either. What agent appraised this house ?

[AtomicCEO]

I predict having another 10 pieces of paper to sign at a home closing because of this lawsuit.

[billay]

So she paid a little over 10% more. I am just curious if there was any improvements to the home she bought compared to the others. Floor plan is one thing. Updates are another. I dont understand the agent appraised situation either. What agent appraised this house ?

It is clear the Ummels did not rush into a decision: They dismissed one agent and canceled deals on two houses before Mr. Little found them a prospect on a cul-de-sac in a five-year-old luxury development. A deal was struck with the owner, herself a real estate agent, for $1.2 million.

 

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.”

 

“And you believed that?” asked David Bright, the lawyer who represents both Mr. Little and ReMax Associates, which was also named in the suit.

 

“Yes, we trusted Mike Little,” Ms. Ummel replied.

[geeteebee]

Most buyer's agents do not work for the buyer anyways. They usually make you acknowledge that they are paid by the seller and may not have the buyer's best interest in mind. Very few agents are truly "buyer's agents". This looks like another case of somebody trying to pass off the responsibility of a bad decision.

[MojoMan]

Caveat emptor

[Codwagon]

Ever owned a pool? They tend to be money pits, as not only are you constantly buying chemicals, but you are also having to constantly fix or replace things like pool sweeps, filter cartridges, pump motors, etc... On top of that with energy prices as high as they are today you are looking at adding about $150-$200 a month to your electric bill just to run the pump. If you happen to have a heater you will only heat the pool until you get your first gas bill, and then you will realize a health club membership is a whole hell of a lot cheaper. In addition, a pool raises the cost of your insurance due to liability issues. Both me and my wife grew up with pools, and our current home has a pool, but we bought the house in spite of the pool, not because of it. If I didn't think my kids would raise hell, I'd back a dump truck up to ours and fill it in. If we don't move again once the kids start driving, I more than likely will fill it in.

 

 

Be sure to drill holes in the bottom of it first.

[Yukon Cornelius]

I loved the agents argument that the pool that comes with the house down the street (for $150,000 less) didn't actually add value to that house because some people don't like that sort of thing.

pools do lower value .. at least in the Midwest.. like perch said they are money pits and youre ins. goes sky high for having one..

[billay]

Ever owned a pool? They tend to be money pits, as not only are you constantly buying chemicals, but you are also having to constantly fix or replace things like pool sweeps, filter cartridges, pump motors, etc... On top of that with energy prices as high as they are today you are looking at adding about $150-$200 a month to your electric bill just to run the pump. If you happen to have a heater you will only heat the pool until you get your first gas bill, and then you will realize a health club membership is a whole hell of a lot cheaper. In addition, a pool raises the cost of your insurance due to liability issues. Both me and my wife grew up with pools, and our current home has a pool, but we bought the house in spite of the pool, not because of it. If I didn't think my kids would raise hell, I'd back a dump truck up to ours and fill it in. If we don't move again once the kids start driving, I more than likely will fill it in.

That's not really the point, is it?

[whomper]

It is clear the Ummels did not rush into a decision: They dismissed one agent and canceled deals on two houses before Mr. Little found them a prospect on a cul-de-sac in a five-year-old luxury development. A deal was struck with the owner, herself a real estate agent, for $1.2 million.

 

It surprises me that they had deals in work and obviously were aggressively looking yet didnt know they were over paying

 

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.

 

This confuses me as well because the appraisal is needed to close. It must be presented to the bank. The realtor no doubt had a right to give them the appraisal when they requested it but these people seem clueless. You dont have to be a realtor to know you have the right to see an appraisal on a 1 million dollar + property before you buy it. The realtor doesnt seem to have disclosed things here dont get me wrong but the buyer is lacking some common snese here too

[Perchoutofwater]

That's not really the point, is it?

 

I was just pointing out that if anything, a pool would lower not raise the value of a house to an informed buyer. So comparing the two, if the houses were identical in every other way, I can not see where the one with the pool should have more value, and can see a number of ways that it could and probably should have a lower value. So the pool argument is counter productive to the angry buyer's argument.

 

What I don't understand is how a buyer bought a house prior to seeing an appraisal, and how he would allow his agent who has a vested interest secure the appraiser. To me that is the real issue of the whole deal. The buyer was an idiot, and the "buyer's" agent probably took advantage of the guy, but isn't there a phrase "buyer beware". What I want to know is how someone so stupid can afford to buy a house that expensive.

[whomper]

All a pool does if you dont want it is take up valuable yard space.

[wiegie]

That's not really the point, is it?

it sure seemed like the point

[Perchoutofwater]

All a pool does if you dont want it is take up valuable yard space.

 

Yeah, but you don't have to mow it, and I look forward to when my daughters get into high school and college, and bring their friends home to lounge around it. That is if I can't convince the rest of my family that we should just fill it in.

[wiegie]

What I want to know is how someone so stupid can afford to buy a house that expensive.

Interest-only-ARM?

[Perchoutofwater]

Interest-only-ARM?

 

Again, what I want to know is how someone that stupid can afford a house that expensive.

[whomper]

Yeah, but you don't have to mow it, and I look forward to when my daughters get into high school and college, and bring their friends home to lounge around it. That is if I can't convince the rest of my family that we should just fill it in.

 

 

I am a big fan of a pool. I was just making a point to Billay about his questions in regards to a pool and its value