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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Technorati Tags: Real estate lawsuit, agency
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Jayson 01.23.08 at 10:42 am
Good post and way to stay politically correct. I hope this doesn’t give all the other “nut jobs”
ideas about suing their agents for whatever the lawyer can dig up.
Knowing lawyers, we could begin seeing commercials - If you bought a home between 2003 - 2007 you may have been misrepresented by…… call today for a free consultation.
I can’t believe he called her a nut job!!!
Athol Kay 01.23.08 at 10:50 am
This may be the tip of the iceberg though. Let’s not forget that from NAR down every realtor and their image softening dog was saying that property values were going to go up, up and then up in a historic expansion of value that wouldn’t go down.
Seriously, what does it mean when “we” say it’s “a great time to buy”.
Obviously this sounds like an extreme case of a proper fleccing, and rightfully should be investigated. But I do wonder if we’re all going to be in for a round of media spankings.
Jay - The Phoenix Real Estate Guy 01.23.08 at 12:34 pm
“But I do wonder if we’re all going to be in for a round of media spankings.”
Most likely, IMHO.
“every realtor and their image softening dog was saying that property values were going to go up, up and then up in a historic expansion of value that wouldn’t go down.”
Makes me glad I’m on the record as saying, “values can’t go up like this forever” (or something very similar. Right on this blog, on more than one occasion)…. Any Realtor that says values only go up and can’t go down pretty much deserves what they get. Again, IMHO.
Jim Little 01.23.08 at 2:20 pm
Jay, 2 things about your article. First, the agent’s name is MIKE Little, NOT Jim Little.
Secondly, I would like to point out that I am not in any known way related to him, and do not work in California.
Jim Little
your Sun City Realtor
Charleston Real Estate Blog 01.23.08 at 3:40 pm
Jay, when I got my real estate license, my broker told me that means they tattoo “sue me” on my forehead and urged the agents in the office to not practice law, accounting or provide investment advice and to document everything.
When I originally read the NY Times article, I perceived a lawyer chasing an ambulance but it could open a can of nasty surprises should the plaintiff prevail.
foreclosurefish 01.23.08 at 6:57 pm
Good point on the first comment of the probability of seeing new commercials and billboards featuring attorneys looking for victimized home buyers from the past six years. That’s exactly what I have been expecting, as well. Hopefully the real estate agent here begins to act appropriately and try and get the case thrown out of court, rather than hurl insults at the woman through the New York Times. That doesn’t play very well in front of a jury, especially a jury of “peers” who may also feel somewhat victimized by their own agent if their property values have decreased, as well.
Jay - The Phoenix Real Estate Guy 01.23.08 at 8:33 pm
Sorry about that Jim! I’ve corrected that glaring mistake.
Michael Oliver 01.23.08 at 9:38 pm
This is a joke, do us Real estate agents get bonuses or anything when investors or homebuyers make money off of our work, of course not as they shouldn’t. But on the other hand if the home was so overpriced why did she even look at it more or less purchase it? Seems like a joke and the buyer cannot understand how she could of maybe got to emotional and purchased a home at a higher price then maybe she would have otherwise. What’s next a stock goes down and every stockbroker that has any client in that stock gets sued by those clients that lost money on that day?
from cox.net' rel='external'>Sharon 01.25.08 at 6:26 pm
I sure would like an explaination of how the house I bought in 2005 valued at 285,000 could now be valued at 150,000 and I put 20,000 into it. I think we were all taken for a ride by the new builders and the mortgage companies. I was told that the value will only go up. Well, at this point I’ve lost it all. I’m all for this woman suing, if she has a case.
Jay - The Phoenix Real Estate Guy 01.26.08 at 1:27 am
Sharon - without knowing a LOT more about your home, it would be very difficult to explain. 285K to 150K is a big drop, but not completely unheard of, particularly in some of the outlying area (Maricopa and Queen Creek in particular have been hit very hard).
As for the 20K you put in, sadly the vast majority of improvements/upgrades usually add very little to the value of a home. Rarely are those things returned dollar for dollar. (Often times it’s pennies on the dollar, if anything.)
Depending on when in 2005 you bought, you may have hit the peak. Current value depends on where your home is, it’s condition (likely good as is sounds like a new build in 2005), size, size in relation to the area and more.
I’m sorry someone told you that the value of you home could only go up. Nothing could be further from the truth. Nothing only increases in value. Home values are cyclical. After the insane run-up in prices we saw in 2004 - 2005, home appreciation had to slow down, and it really needed to drop, difficult as that is to hear.
If you want to share more info about your home, I’d be happy to try to explain more. Feel free to email me if you want to keep it private.
Austin Real Estate Blog 01.26.08 at 4:28 am
I didnt realize the agent was acting in a way that hurt his case. I have always been pretty careful in my real estate transactions and never promise that property values will go up. But if someone sues 3 years later I dont know if that provides much protection. Someone is just going to be angry that their house went down in value and is looking for someone to blame. Even if I told them their house might go down in value in 3 years time they have probably forgotten what I said.
Sharon you wrote
I sure would like an explaination of how the house I bought in 2005 valued at 285,000 could now be valued at 150,000 and I put 20,000 into it. I think we were all taken for a ride by the new builders and the mortgage companies.
I understand your frustration. But the answer to your question is simple. The housing market is experiencing a huge decline. I dont understand why you are blaming your mortgage company?
I lost some money in the tech bubble. I dont blame anyone but myself. I bought the stocks. The stocks went down. And I lost money.
Athol Kay 01.26.08 at 9:16 am
Well if the 285,000 + 20,000 = 150,000 a few years later is true, a simple “oh the housing market declined” doesn’t seem to quite cover it.
The position of the NAR Chief Economist of the time was that housing was under going a historic expansion that would not decline.
Shailesh 01.26.08 at 10:20 am
To piggyback on Athol, I had posted an article in AR last fall regarding a potential borrower who had contacted me to refinance or seek advice on whether to sell his house if he couldn’t lower his payment. He was very upset that his house was losing value and he felt the agent involved in the transaction didn’t help him understand everything he wanted to know. He said he felt rushed when he bought in June of 2006. In my AR post I simply wrote what this borrower had said to me and asked pretty much the same thing Athol did “what do agents mean when they say to their buyers that its a good time to buy, do they back up the statement with significant factual points or just repeat what they are told?” I felt it was a legitimate question for any professional to be able to answer in their own words - so to speak.
My post was lynched by agents all across the country. I was called an “agent hater” and they couldn’t beleive “why any agent would ever do business with me”. I’m not much of a person for that kind of public slaying so I deleted my post and haven’t posted a relevant article in AR since.
Watching the video on MSNBC (Jay has a more recent post with a video link), I was reminded of the borrower who contacted me back in August last year. Marty Ummel is pretty much saying most of what this potential borrower was saying back then.
So, in short, this is a real concern amongst homeowners and simply blowing it off as a “nut case” will not help. Sure lawyers will try to take advantage of the situation, but the industy does have some answering to do in this case. I hope this case comes to a managable resolution for all parties, but don’t be surprised if more people take a crack at this in the coming months.
from cox.net' rel='external'>Sharon 01.26.08 at 11:48 am
Why the huge decline?? Why didn’t someone in authority (government) take a look at the new builders that were jacking up prices by the thousands every week? Why were we told that sub-prime mortgages were the best mortgages? Why should we believe what comes out of the mouths of mortgage brokes? We are not all in the know. Thank you Athol for getting my point. I live in Queen Creek - Pinal County. We were booming out here and the promises were heard from realtors and new builds were high. I like my community and someday when we are more developed in commercial it will be great but I’m not young and I don’t have the time to recoup. I pray to God I don’t have to walk away from home like so many are doing.
Austin Real Estate Guy 01.26.08 at 12:10 pm
I wish I could say I was surpised in hearing about this suit. I also am pretty disappointed in the “nut job” comment. That is just one more thing to make agents look like sleaz bags. Image has always been a problem and we don’t need guys like that in the business.
Jonathan Dalton 01.27.08 at 1:35 pm
> Let’s not forget that from NAR down every realtor and their image softening dog was saying that property values were going to go up, up and then up in a historic expansion of value that wouldn’t go down.
You apparently don’t know either me or my image-softening dog very well. Not EVERY realtor was spewing such garbage.
Athol Kay 01.28.08 at 10:33 am
Agree Jonathan. Though unfortunately it’s the general public perception.