Why AGENCY is a big deal in Real Estate

One of the best and worst problems with my background as an attorney is the occasional listings I get from consumers who have been taken advantage of by their previous agent in a real estate transaction.  I occasionally farm expired listings and was recently contacted by a couple who lost thousands of dollars because their agent decided that closing a sale and receiving a commission was more important than serving them and protecting their interests.

When we sat down with these clients I could tell by their hesitancy that they had been burned, but even I was shocked to discover the level of mistreatment by their previous agent (using the term "agent" extremely loosely).  They had an established relationship with a Realtor who had assisted them in several residential transactions over a period of almost nine years.  They naturally turned to her when they decided to delve into investment property and "flipping."  Their first purchase was a fourplex on a street which had several for sale by the same owner.  They had the first two inspected and decided to pass on them because of extensive problems that came up on inspection.  Apparently their hesistancy to purchase sub-standard property "offended" their agent, because the next when they began investigating the third potential property (which had a visible crack in the brick from the foundation up to the roof) their agent told them that an inspection would not be necessary, and suggested that they only needed to purchase a home warranty and that the warranty would cover any potential foundation problems.  Sadly, this couple followed their agent's advice as they were inexperienced and relied upon her "expertise."

After contacting me, we inspected the foundation and found obvious problems which would cost thousands of dollars to fix.  They learned a terrible lesson in a very expensive manner, but I believe that their previous agent may also learn a terrible lesson in a very expensive manner.  In Texas, and in most other states I am sure, real estate agents like all other agents owe the highest level of fiduciary care to the principals they serve.  This agent's obvious misrepresentation about the necessity of an inspection and the extent of coverage of a home warranty will likely fall under the Texas Deceptive Trade Practices Act.  I have already referred this couple to an attorney and they will be forced to seek damages from the agent and her broker in a legal action.  The agent may have received several thousand dollars in a quick commission, but she now faces investigation by the Texas Real Estate Commission, a lawsuit under the DTPA which may include treble damages and attorney's fees for intentional or grossly negligent misrepresentations (and her E&O insurer may not cover all the costs), and down the road suspension or even permanent loss of her license.  Even worse, she was also involved in other dealings with this same couple in which she breached her duties of fiduciary care and faces even further investigation and legal complications.

We have all heard stories circulated of agents who take shortcuts to commissions.  We must keep in mind, however, that we are paid a substantial fee in a transaction to protect our clients.  In the past, the real estate community focused more on the marketing and sale of property and sometimes neglected their responsibility as an agent.  Now as state laws seek to protect consumers involved in cases of fraud or negligence, we need to all remind ourselves of the duties we owe our clients.  If the agent discussed above had done so, not only would she have avoided the legal problems she now faces, she also would have kept these clients for many years and earned commissions by helping them in many other transactions.