Article Summary: Buyer buys a property through a buyer's agent. Property decreases in value and buyer sues his agent for misleading buyer on value of the property by failing to disclose some lower-priced comps in the area.

It would be interesting to know the following details, which the article fails to provide:
1. Appraised value of the property at time of closing
2. The agent's side of the story, specifically why the comps in question were excluded. (Perhaps they were not in as good a condition as the subject property, or were not arms-length transactions? Article is silent on that point.)
3. What the contract between the buyer and his agent states is agent's duties to the client

Personally, I would guess that if the appraised value of the property is in the same ballpark with the number that the agent gave his client, this case is dead in the water. Agents are not appraisers, which is why lenders require a friggin' appraisal before writing a mortgage.

I'm curious why buyer feels his recourse is with his agent and not with the appraiser. He's already run up a $75k legal bill... this case isn't looking very pretty for the buyer.

artglaz said:So, is it the responsibility of the salespeople at BestBuy to tell me that Circuit City has the product I want on sale? It just goes to show that buyer's remorse is applicable to any purchase regardless of how high the price may be.That was my first reaction as well.

However, one difference is that the buyer agent does have the fiduciary duty to look out for their client. The BB sales dudes fiduciary duty is to BB. Not much of a case though.

This "sophisticated buyer" term is redonkulous. I never saw it used this way until recently. I don't know that it's even in place for more than 10% of the home-buying population.

/tirade

Blieb said:This "sophisticated buyer" term is redonkulous. I never saw it used this way until recently. I don't know that it's even in place for more than 10% of the home-buying population.What's fresh is that that's why you are paying your agent to begin with. So you don't have to be a "sophisticated buyer", whatever that is.

The agent saying his client should have been more sophisticated was a very poor choice of statements to make considering it was the agent's responsibility to be the sophisticated one. I still think this case has zero merit, as providing property appraisals was probably not one of the agent's responsibilities in the agency agreement.

This is anyway a stupid move on the part of the buyer. Spending $75k out of pocket... what does he think his damages are? The agent is covered by an E&O insurance policy. My guess is that the insurer fights this tooth and nail so as not to encourage hundreds of thousands of copycat lawsuits.

sechs said:If this transaction was in California, there are some very specific rules about what real estate agents can and cannot do.

In my opinion, if the agent did not have an appraisal, he should not have represented a value. It seems obvious that there was some fudgery on the part of the agent to get the sale through. The case appears to have merit; whether there was any wrong-doing is a different question.

The real issue is that Buyer's Agents are not "truly" representing the interests of the buyer. It would really be much clearer for the average lay consumer if all buyer agents explained and documented explicitly that they represent the seller's interests only. The buyer's agent becomes an explicit marketer for the seller. This removes most of the shadyness that can occur and eliminates any expectation of confidentiality. There is an obvious conflict of interest between the buyer and the buyer's agent. The normal compensation structure for Buyer's agents motivates them to close as many deals as possible. This means they are NOT motivated to help you negotiate and/or find the best deal possible. This SHOULD be obvious to buyers. It is not obvious because of the Buyer's Agency documents that are given to many buyers.

I also think the MLS system should be opened fully to the public to create more market transparency. I had access to the full MLS for about a year due to a very close relationship with a realtor friend. It is an extremely useful resource ( I would pay for it if I could). I don't think there is rocket science to assessing approximate home values. Consumers compare prices and value every other product they buy, why not homes too?

nycll said:stook2001 said:
The real issue is that Buyer's Agents are not "truly" representing the interests of the buyer. It would really be much clearer for the average lay consumer if all buyer agents explained and documented explicitly that they represent the seller's interests only. The buyer's agent becomes an explicit marketer for the seller. ...

In almost any situation, the agent(s) will push the seller as hard if not harder than the buyer to close the deal. So what should be made clear is that they represent their own interest only. I agree the MLS listing should be open to non-agent with a fee.

Here is the original article from NYT: Link

We are basically saying the same thing:

"The normal compensation structure for Buyer's agents motivates them to close as many deals as possible. This means they are NOT motivated to help you negotiate and/or find the best deal possible."

Agents want to close deals. They don't want to risk losing deals by negotiating hard or recommending aggressively low offers. It takes the rare and special agent to encourage low balling.

LOOPHOLE said:I think their lawyer duped them:

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 sure hope for Ummel's sake the 75k is a typo.

I imagine we will never hear, but I'm curious how the comp figures eventually became known.

My own personal anecdote mirrors others opinion that *way* too many realtors look after themselves, and any help given to the seller or buyer is coincidental: I tendered an offer on a home, and while waiting for closing drove out one day for fun. While walking around the house something started to bug me, so I measured the outside dimensions and found that the stated size was at least 10% greater than actual. My 'buyers agent' put up a fierce fight to push me into paying the contract price. I refused, and fired him. A week later he came to me at work with my earnest money and apology in hand.

I still regret not reporting him to the realtor ethics board.

Colecovision said:They wouldn't admit to it now, but at the time of the purchase they were probably hoping and praying that the appraiser would appraise it at their purchase price.

Not to mention using a stated income application to avoid the hassle of having to verify their income.

I don't feel these buyers are entitled to anything when they are only arguing a 10% overpayment. It's not like the realtor sold them some everglades "Riverfront" property for 10,000% over actual value.

EricGo07 said:That said, If the appraisal went to the agent who sat on it, or was aware of the results and did not relay them, then I say he is in big doodoo.I cannot think of any situation in which that could happen.

There are actually strict ethics rules with respect to where the appraiser's report goes. If you aren't the one who ordered the appraisal, the appraiser won't discuss anything about the property or the report with you. You sure as heck aren't going to get your hands on the report if you didn't order it.

Assuming the buyer financed the property, the appraisal would have been ordered by the lender and would have gone directly to the lender. If the appraised value was too low to justify the loan amount, the lender would have notified the buyer. The buyer is always entitled to a copy of the appraisal report (you paid for it, after all), and every lender I've ever worked with (I am a landlord, so it's a lot of them) just automatically sent me a copy of the appraisal report without my asking. (Technically, you need to ask for it in writing.)

On the other hand, if the buyer paid cash for the property and ordered an appraisal for his own information, the appraisal would have gone directly to the buyer.

I have never heard of a Realtor ordering an appraisal of a property on behalf of a buyer, and cannot think of any reason for that to ever happen.

It's a shame you had a poor experience with a Realtor. I've worked with many of them (I am actually a licensee, but I only ever represent myself and my LLCs), and they are very valuable resources for finding properties. You just have to get the right ones.