Legality vs. Morality: What Would You Do?

Real Estate Agent with HomeSmart Elite, Scottsdale AZ

A buyer asks for your help in buying a new home, stating that after acquiring it he intends to "dump" his current home (walk away and let the bank pursue foreclosure). Knowing this, should you help the buyer, and if you do, are you courting risk in some way?

This question arose at a recent seminar I attended in Scottsdale on real estate contract law, moderated by Chris Combs, a local real estate attorney and columnist for the Arizona Republic and Arizona REALTOR Digest, and Chris Charles, a real estate attorney in Chris Combs' law firm.

Chris CombsChris Charles

Laws and regulations very from state to state, of course, but in Arizona the answer is this: there appears to be no additional liability or duty to disclose anything for the real estate agent who helps this buyer.

If the buyer qualifies for a loan on the second house, and the lender is willing to fund that loan, there is no obligation to disclose to the lender that the buyer is planning to default on his current home. Nor is there any obligation to tell the lender on the first home that the buyer is preparing to default and walk away.

So much for the legality. It doesn't say much for the morality of the scenario, though, does it?

Comments (7)

Richard Weeks
Dallas, TX

Morality or legality, I just don't think I would like to represent someone who thinks this way.

Feb 27, 2010 03:22 AM
Merrill Moss
HomeSmart Elite, Scottsdale AZ - Scottsdale, AZ
Scottsdale AZ Homes For Sale

Richard -- I'm 100% with you on that.

Feb 27, 2010 06:20 AM
John Neibich
Home Savings of America - Prescott, AZ

Now, would it violate our state ethics if you did turn them down to be their agent?

I also have been wondering, is there any potential civil liability to banks or real estate brokers, promoting in writing that real estate ALWAYS appreciates 5% a year? Or that homes are the greatest investment?

It seemed to me, alot of the advice buyers were getting in 2005-2007 was not in the best interest of the clients, though it seemed to be in the brokers' and bankers'best interest.

Feb 28, 2010 01:30 PM
Eric Lanspa
Town & Country Realtors - Sioux Falls, SD

I don't think it's a violation to choose not to work with anyone for the above reason.  The code of ethics, Article 10 states this:

REALTORS® give equal professional service to all clients and customers irrespective of race, color, religion, sex, handicap, familial status, or national origin.

I'm with Richard.  I don't wish to associate with that type of person, nor do I want the reputation as someone who does.

Feb 28, 2010 01:58 PM
Suzanne Strickler
Realty Mark Associates - Havertown, PA
School is never out for the Successful.

Merrill - Using your scerario, as my buyers they would get preapproved by my mortgage rep in my office. He is a great guy. I wouldn't want to waste his time or mine knowing what this buyer intends to do. Defaulting on the current loan would negatively impact their credit sooner or later which would have a ripple effect on the purchase of another property. I feel as an ethical issue my mortgage rep should know I wouldn't let him get blind sided.

We all work hard for the money and we should all be treated right.


Mar 02, 2010 06:39 AM
Michael Bergin
Coldwell Banker Residential Brokerage - ABR - SRES - Alexandria, VA
Northern Virginia Real Estate

It reminds me of some of the "legal" show played out on TV - legality and morality do not go hand in hand.  Interesting question though.  I hope I never have to make that choice.


Mar 02, 2010 01:35 PM
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

I'm with Michael. I never want to have to make that choice. One's own personal morality doesn't always mesh with the laws, which is why there is such a cultural war in this country over abortion, gay marriage, etc.

Mar 08, 2010 04:57 AM