Why AGENCY is a big deal in Real Estate

Real Estate Agent with Keller Williams Realty

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.

Comments (9)

Gerhard Ade
RSVP Real Estate - Seattle, WA
What sets me apart, will set you apart.
Ade HouseThanks for this blog your insight, Steven! They say there are two kinds of agents: those that have been sued and those who will be.
Oct 11, 2006 07:11 PM
Jay and Linnea Hanley
PrudentialFloridaRealty - Jupiter, FL

Excellent blog, I really feel for those owners.

Jay and Linnea Hanley

Oct 12, 2006 01:03 AM
Christine Adler
FindAHomeWithMe.com - Fort Lauderdale, FL
SE Palm Beach, Broward & NE Miami-Dade Counties FL
We need to remember we are here to serve and to get the needs of the buyer or sell met as close as posible.
Oct 12, 2006 01:32 AM
Michael Roberts
Real Estate Professionals of Glynn - Saint Simons Island, GA

As a personal practice I do two things which cover the inspection problem.  First off I always have the buyer go through the property with me while I point out potential areas of concern.  Then I provide them with a list of certified inspectors.  I suggest that they initiate contact and establish their relationship with the inspector.  I then have them sign a document stating that they have been provided with a list of inspectors and have or have not chosen to employ an inspector as recommended.  If they have the inspection that is great and leads to further negotiation.  If they refuse I'm covered. 

The rationale for the joint walk through is two fold. 1.) to provide us with information with which to base on offer on. Afterall we can approxiamte ( the buyer and me) what repairs or replacement may cost and use that in direct negotitations. 2.) to educate the buyer as to the need of inspectors.

Sounds like the agent you described had no plan other than immediate self gratification.  Too bad she didn't ask "I wonder ?".  Yep, I wonder if that crack is structural... a material defect?  This will be an example that others will hopfelly learn from.

Oct 12, 2006 02:38 AM
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty
When we list properties we pay for an inspection by a licensed home inspector.  When we represent Buyers we insist they get a home inspection, and if they decline, we pay for the inspection.  We also make sure that someone is paying for a home warranty, even if it has to be us.  Ounce of prevention is much better than a pound of cure.
Oct 12, 2006 02:44 AM
Susan Trombley
Trombley Real Estate - Wake Forest, NC
Broker/Realtor, Raleigh, Cary, Wake Forest, Youngs
I always recommend my buyers to show up for all inspections and ask any questions they have to the home inspector. do not take anything for granite.
Oct 12, 2006 03:40 AM
Dave Rosenmarkle
Highland Realty, Inc - Arlington, VA
33 years of providing fully satisfying service!
Whatever happened to honesty and serving the client's interests?
Oct 12, 2006 04:46 AM
Eddy Martinez
Nationwide Funding Group - Highland Park, CA
Our buyers interests are the priority. Customer service is king in this buisness.
Oct 12, 2006 04:58 AM
Ginger S
Wilkinson & Associates, Wilmington NC - Wilmington, NC
Wilmington NC Real Estate & Relocation~
If we always put our clients first we will walk the straight and narrow.
Oct 12, 2006 04:44 PM