The RE.net is a buzz with the New York Times Article about home buyer Marty Ummel suing her real estate agent, Mike Little, because she feels he misled her and she overpaid for her Carlsbad, CA home.

We live in a litigious society. Unbeknownst to many, real estate agents are constantly being sued for various and sundry reasons — the most common of which are failure to disclose material facts about a home and agency issues (the bulk of which arise from the practice of “dual agency” — where one agent represents both the buyer and seller. A bad practice in my opinion, but that’s another post).

This particular lawsuit may be the first in which a buyer is suing an agent because they felt they were mislead into over paying for a home.

We must keep in mind there are always two sides to every story, and we’ve only been given a teeny bit of insight into what is behind this lawsuit. We are not privy to a lot of the “evidence”. 

Based on what is in the Times article, here are some of my takeaways:

Point 1: The defendant hired an expert witness, Roger Holtsclaw (also an agent) that is quoted in the Times as saying:

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.

Bad idea to assume anyone is a “knowledgeable, sophisticated buyer”. One of the primary roles of a real estate agent is to assess his client’s knowledge and understanding and to HELP THEM through the often daunting process of buying or selling property. Hell, even the most knowledgeable, sophisticated buyer on the planet needs help. That is our job.

Point 2: The defendant was also a mortgage broker:

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.

Another bad idea. I made my stance on “combination agent/lenders” crystal clear here:

The Combination Real Estate Agent / Lender: One-Stop Shopping, or Half-Assed Service?

And really, a client shouldn’t have to request to see anything. Anything and everything they need should be provided up front, without asking. Maybe, just maybe the client doesn’t even know what to ask for. I’m not saying that to belittle anyone. The fact is, real estate transactions are difficult and mired in paperwork. The average Joe buys a home something like every seven years. A real estate professional deals with this stuff every day. You’ve got to give your clients everything they could possibly need to help them through the process.

Interestingly, several people have pointed out on other blog posts about this story that the agent was the lender. I’m not so sure that is correct as later in the article it says:

Ms. Ummel’s original suit included the appraiser, who was accused of skewing his report to make the Ummel’s house seem worth the purchase price, and the mortgage broker. Modest settlements have been reached with both.

It seems odd that Mr. Little would settle on the mortgage side while the agent side was still in progress. The article states Little encouraged the Ummel’s to use his lender services. It doesn’t say they did. Just a point of interest to me, it matters little. UPDATE: According to this article from Feb 12, 2007 in the Voice of San Diego, Little was indeed the lender in this transaction.

Point 3: In a brief phone interview with the New York Times reporter, Mr. Little called the case “ridiculous,” adding: “The lady’s a nut job. I didn’t do anything wrong.”

OK, I’m no attorney, but telling a NYT reporter that the lady suing you is a “nut job” just doesn’t seem very prudent. Nor professional.

Should agents be afraid?

Again, let me reiterate, I don’t have all the facts surrounding this suit. I sense a lot of fear in agentdom out there. Call me crazy, but this suit doesn’t scare me. Here’s why:

1) We never make claims of future value in property. That’s just stupid. If I had a crystal ball that good, I’d be on a beach somewhere in shorts and flip-flops drinking cocktails out of a coconut.

2) We provide (and educate on how to assess) extensive comps (recent comparable sales) before any offer is submitted.

3) We don’t practice either dual agency nor mortgage lending. We represent one client, and leave the lending to the lending experts.

4) We review in mind-numbing detail the terms and conditions of all contracts, addendums and disclosures.

5) We assume nothing and document everything.

Should agents be afraid? Not if they are doing their job. Concerned, sure. This suit seems to be entering new territory and should be watched by any real estate agent/broker. We’ll be following it, as will others, I’m sure.

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