Sue your real estate agent (David Streitfeld, “Feeling Misled on Home Price, Buyers Are Suing Their Agent”, New York Times, Jan. 22; Gryphon @ PoL). Related: Vikas Bajaj, “If Everyone’s Finger-Pointing, Who’s to Blame?”, Jan. 22 (mortgage and housing-finance litigation).
Buyers’ agents, a recent market innovation, get a 3% commission, holding themselves out as a fiduciary because of their expertise in the local market. Is it within the scope of their professional responsibility to tell you that the home you’re looking at is selling for 20% more than comparable homes on the same block? I can see arguments both ways.
But why not let this be decided in advance?
This would be very simply answered if courts respected contracts, and permitted parties to negotiate the scope of the duty. Because courts do not, it will effectively be a California court that regulates this marketplace decision, and we can be quite confident that they will not reach the optimal result.
My first choice would be a baseline of liability, and letting parties contract around the scope of that liability. If you’re going to hold yourself out as a professional and a fiduciary, you have a duty to do a competent job: it’s a basic professional malpractice cause of action. If your contract disclaims that liability, you send a signal to the marketplace.
But because I can’t trust the courts to permit parties to arrange their own affairs to their own liking, I have to say the preferable result is for no liability here, rather than the morass we’ll get if liability is imposed and parties can’t contract around it or agree to arbitrate their claims. A shame, because that second-best solution is almost certainly not the optimal solution.
A downside to agent liability is that Fair Housing laws limit the disclosures that brokers can make, which may put agents in a damned-in-they-do, damned-if-they-don’t situation.
Part of the problem is the 3% commission is based on sale price. The agent has the incentive exactly backwards.
Wouldn’t it be better to set up a contract where the more money the agent *saves* the buyer, the more money the agent gets?
I thought damned-if-they-do, damned-if-they-don’t was the desired result, at least from the plaintiff’s bar.
xrey- Saved from what? If it is from asking price the buyers agent will just jack that to leave more room for the price to drop. I can see appraisers getting nailed for inflating value, but the Realtors’ job is to match you with a house that meets your requirements at a price you can afford, not to ensure that you get the best value possible. The market sets the price.
The only way these people should have a legal claim is if they can prove that there was fraud in the appraisal process, or the Realtor misrepresented the properties properties.
Buyers remorse /= grounds for suit
Reading between the lines, one sees that Ummel sued the appraiser for allegedly inflating the value, and simultaneously sued the broker for hiding the appraisal from her. She seems to have won two nuisance settlements already.
Can you sue a lawyer for advising you to take a bad settlement? What if he was on fixed payment and his interest in taking the settlement and doing less work is averse to your interest in getting the best deal?
The claim is inherently reasonable. The question is whether the facts back it up or whether this is either buyer’s remorse or the broker’s failure to predict a future market change.
Seems to me that anyone who consults only ONE agent when seeking a house is nuts.
And where they are recognized, buyer’s brokers are indeed obligated to protect the buyer’s interests, which includes showing them properties that are comparable.
I think a buyer’s broker here would have avoided this problem.
Although it apparently didn’t occur until after the closing, the fact that the broker didn’t share the appraisal is troubling.
There are a number of things wrong with this story. However, one thing is certain, namely that the Ummels are the type of people that P.T. Barnum was talking about.
Anyone can now get comparables and other info instantaneously on zillow.com and similar websites, so I don’t think realtors have exclusive or exceptional access to relevant info any more.
What intrigues me more is how realtors are able to keep a stranglehold on the market. Have you ever tried to sell by owner? I did. You get blackballed by realtors, who steer their clients away. I eventually had to get a realtor.
It’s a scam, because they do very little for the big bite they take from the selling price.