When I first decided to work as a buyer broker in about 1990, it was hard to find a lot of good information about how to do it. Most of the books and case law I found came from California, where selling agents represented the buyer as the normal practice – even back then.
Now, almost thirty years later, buyers have their own agents in most of the transactions around the country. And it seems we may be getting some important lessons about our obligations to our buyer-clients from, guess where? California!
Earlier today, I stumbled across Margaret Hokkanen’s post about the lawsuit filed by a pissed off buyer named Marty Ummel. There is a great article in the New York Times and a video clip from the Today Show that explain the case and the beef Marty Ummel and her husband have with their agent.
In a nutshell, in 2005, they bought their dream house in a suburb of San Diego at the peak of the market. A licensed real estate agent was the seller, and their buyer broker acted as Realtor and lender. Bottom line, there were comps on the block that showed the price might be high. And while it's not totally clear, it sounds like some very nearby homes were on the market at the time, and their agent didn’t mention or show these properties to them, which would have enabled them to incorporate the information into their decision-making. The buyers also maintain that, in his extra role as lender, he manipulated the appraisal.
Ouch!
This has become a business where most brokers highly encourage their agents to list, list, and list. The Ummels’ buyer broker was, like me, a 25-year veteran in the business. And while I don’t know the details of his particular practice, a long track record is usually some sign of competence, or at least that he knew what he was doing.
But many of the buyer brokers out there today are rookies who start off as parts of teams headed by super-star listing agents, and they are hired and paid by that Big Lister to “represent” buyers who they pick up marketing their listings. If the buyer agent team member is on the selling side, Big Lister can keep the transaction in-house, get a bigger chunk of the commission and maintain more control during the transaction than if a buyer broker from another office or company sold the place. In many practices that focus on listings, I think it is hard for Big Lister to be totally bi-lingual, speaking Buyer Agent and Listing Agent with equal fluency. 
While I am thrown to be sympathetic to the agent, I couldn’t help but wonder, did he really represent the Ummels’ interests while representing them in their transaction? Are these buyers, like so many others, trying to blame someone else for their bad buying decision? Or should their agent have shown them all of the other houses – or at least offered to do so? Should they have tried to pull the comparable sales information out of some hard to get to public data base? Or should their agent have given them the information with out being asked for it?
Whether or not the Ummels have a case was not as important to me as asking myself - do I have protocols in place to ensure my own clients will never accuse me of railroading them into an overpriced house, either in a court of law or at a Washington cocktail party?
This case is a good thing. Marty Ummel has said she is bringing it in order to change the industry. And regardless of the outcome, I think she will encourage agents all over the country to re-examine some of their practices, not in terms of what the NAR or our local real estate regulator says might be ethical, but also what is in a buyer’s best interests - really.
Real Living | At Home - Washington, DC
When Looking to Buy or Sell - Make the Right Move
Well problem 1 is the agent was also the lender! Now that is just plain dangerous and should NEVER be allowed to happen.
I also think many REALTORS are being used a punching bags for buyers who were too eager or not listening to us from the start - not that all agents are angels... we know that is NOT the case. But someone who has been in the business for years - probably has been pretty honest and competent - or he would have been chased out the business and into court years ago!
If there was no CMA run; that's an issue. Then again; a CMA isn't perfect and is up for interpretation. Those of us that have had an Appraiser blow holes into CMAs we ran for buyers; doesn't make us not trying to get the best deal for our client; it just shows a difference of opinion.
I try to show a buyer every like home for sale; but currently the shear numbers will make most peoples heads pop right off!
Feb 07, 2008 06:00 AM
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ
Patricia,
I had to flag this post...this is a very delicate issue and you have presented it in a very admirable and non biased fashion! Thanks, Fran
P.S. The outcome of this case could signal some very needed changes within our industry!
Feb 07, 2008 06:08 AM
DFW Living - Fort Worth, TX
Real Estate Broker - Fort Worth Texas
There is just no way with all of the available inventory these days to show every like property. These buyers made a bad purchsing decision and don't want to live with it so they are looking for someone else to blame.
The buyer agent IS an idiot, though. From what I have read, his own attorneys need to silence him before he does more damage by being quoted as calling Mrs. Buyer a crazy nut job like he has been doing so far. He's not helping his cause when he makes statements about her lack of due diligence either.
Feb 07, 2008 09:44 AM
Sold Buy the Sea Realty & R.E.N.T. - Wilmington, NC
REALTOR, GRI, CBR, SHS, e-PRO, ABR
I am watching the case as well. I think one of the "keys" here is that they bought at the height of the market when a CMA was produced to determine how much OVER list price to offer to get the house. I've never believed an agent should act as a loan officer for the same transaction and I'm sure that's not helping him in this case. I just wonder how much the Ummels would have shared with their agent had the market continued to escalate and they'd sold and walked away with hundreds of thousands of dollars. He'd probably have been lucky that they'd remembered his name and called him to list it.
Feb 07, 2008 10:35 AM
Licensed Through Referral Connection, LTD. - Lake Zurich, IL
I can't imagine why anyone would act as both the real estate agent and lender at the same time. That just screams "fishy" to me.
Feb 07, 2008 11:19 AM
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
Patricia, it has become somewhat common around here for agents to do their own loans and I have just had a BIG problem with that. To me it is a HUGE conflict of interest. I wondered how long it would take before one of these came to a lawsuit. The lender I use to refer wanted me to do that and I said thanks but no thanks.
Feb 07, 2008 12:43 PM
West + Main - Bend, OR
Principal Broker - Licensed in Oregon
It is a wise person that can learn and evaluate their own practices from another's mistakes - I agree - it really does not matter what happened for us - what matters is are we doing the right thing - well said
Feb 07, 2008 04:25 PM
Boardman Realty - White Bear Lake, MN
REALTOR Serving Mpls/St Paul North & East Metro
Patricia--It was just a matter of time the practice of representing a buyer and being the loan officer blew up in someones face. I make it a practice to offer the names of several competent LO's, none with ties to my broker. I like that you brought up the practice of the newbie buyer's agents. It is a practice that people should be more informed about too. All in all, good post and great topic Patricia!
Feb 08, 2008 12:19 AM
Top Bragg Realty, Fayetteville NC, Home of the 82d ABN DIV - Fayetteville, NC
Certified Military Relocation Expert
This a a messy situation. I definitely don't like the agent being their lender as well. He just opened himself up to so many problems not only for himself but for others too.
Feb 08, 2008 12:28 AM
RLAH@properties - Washington, DC
Home in the Capital
Stephen, I agree with you totally. It's not the custom here, and we even get a little nervous when the agent has a spouse who is a loan officer or title attorney.
James, I think it's important to give buyers some sort of CMA or clearly understood information on previous sales. As a buyer broker, you are not a silver-tongued salesperson. You're their protector, at least to the extent that you can do that.
Fran, this is a great opportunity for agents around the country to learn from a colleague's mistake - always much less expensive thatn learning from our own.
Amanda, remember that this all happened in 2005 when there was not a lot of inventory out there. And, yes, this guy calling his ex-client a "carzy nut job" is not helping his case.
And Gregory, I think that even if the market had gone nuts after the sale, paying too much didn't set too well with these buyers. I don't know if they were in a multiple offer situation or if they paid over asking. I guess you'd have to read the complaint to get the whole picture.
Feb 08, 2008 12:41 AM
RE/MAX United Real Estate - College Park, MD
The MD Suburbs of DC
Patricia,
I was actually pointed to this story by Brian Brady when we were having a little bit of back and forth about this very topic.
It seems the "buyer" in this case was a savvy investor type who just saw an opportunity to make headlines and maybe make some money as well.
The sad fact is that during the housing "frenzy" from 2000-2005 people were blind, dumb and deaf. All they wanted to do was get a house and get it fast before it went up another $100,000 and they "lost out" on the biggest commodity appreciation since the dotcoms.
I agree the agent in this particular situation should have been more diligent and he certainly should not have been the loan originator as well. That was just a lawsuit waiting to happen. However, where does the consumer/home buyer pick up any responsibility?
There is plenty of blame to go around with lenders creating wild and crazy mortgage products, Realtors looking to make fast and easy money, appraisers that were so busy they had to book out weeks, title companies backed up with waiting rooms that looked like airports the day before Thanksgiving.
But when do we stop saying it's everybody's fault but our own. Everybody was an adult in this particular scenario and the buyers were probably more savvy than most home buyers. How many people go shopping for a $1.2 million home without some understanding of the market???
I like this quote from the NY Times story: “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?’ ”
Let me get this straight! If it goes up -- no prob. Everybody's happy. If it goes down -- sue your Realtor.
Hey, why not!
End of rant...... :-)
Feb 08, 2008 07:44 AM
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!
Patricia- I agree with Ken's and Amanda's comments. While I do not recommend the agent to be both the buyer's agent and the loan originator I also do not fault him in perhaps wanting to control the transaction. I just cringe here in Florida when I do not know the mortgage broker a buyer chooses. Deals go sour so much and most of them don't do loans full time and have no clue what they are doing and so that tends to make the agents want to do the loan to make sure it goes through.
Now for these buyers; would they have sued their agent if the house went up in value? They are savvy investors, they are not ignorant and they fired their first agent so they could have fired this one too, but they did not. They knew the other homes on the market, they were searching the internet for homes too. They were not solely depending on their agent to find them a house.
This country has gotten so sue happy that it makes me totally sick. There is no personal responsibility and there is always someone placing blame on someone. It is out of control.
Real Estate goes up and goes down, it is not a stock purchase and it would be hard to prove damages in something that is not liquid. If they hold on to the property than the value will go up again and if they were flippers than they got caught in the bubble and need to suffer their own consequences.
Feb 08, 2008 09:28 AM
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor
Patricia - As an agent you have to be so careful and not showing similar homes on the same street that were a lot less expensive is something I would NOT do - your client needs to see them!
Feb 12, 2008 12:19 AM
Anonymous
Shame on Marty.
They looked at many homes. Having done so, they formed their own "appraisal" as to the relative value (to them) of the home they willingly purchased. Their broker performed a service, and appatently handled the transaction well.
For her to paint herself as an "uninformed novice" makes me sick. If she was a first-time buyer... maybe. If it was the first home they saw... maybe. but they were well aware of the local inventory, the closed-price history for similar homes, and it turned out that they paid more than any of their neighbors.
So, rather than look foolish for that: buying at what turned out to be the peak of the local market, she makes herslf into a whining opportunistic completely irresponsible pain-in-the-ass.
I feel badly for the Realtor who no doubt did his best to find them the best home to meet their needs and budget. Sure glad he got paid well for his work. NO doubt his Attorney will make mincemeat out of her complaint.
Mar 31, 2008 08:15 AM
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