Taking a Buyer's Agent to Court

justice.jpgThis story, about a California couple’s lawsuit against their buyer’s agent, appeared in The New York Times this week.  In 2005, the couple, Marty and Vernon Ummel, moved from the Bay Area to Carlsbad to be closer to their children, employing the services of a buyer’s agent in purchasing a $1.2 million home. 

Mrs. Ummel now claims that the buyer’s agent, Mike Little, a veteran with ReMax, failed to inform them that other homes in the same development were selling at the same time for substantially less.

Mr. Little, who refers to Mrs. Ummel as “a nut job” in the article, plans to argue that the Ummels’ situation is due to their own lack of due diligence.

The story was The Times’ most e-mailed the day it appeared, and it has generated considerable comment, including this post on the Redfin corporate blog.  Mrs. Ummels isn’t the most sympathetic character in the world: She’s someone whose bad side you wouldn’t want to be on. Also, people who buy $1.2 million homes aren’t exactly hurting for money.

But I find it interesting that this agent has divorced himself from all responsibility for the Ummels’ overpayment for the house.  What did the Ummels pay him $30,000 to do?  Unlock lock boxes?   When people hire real estate agents, they expect them to look out for their interests.  Agents have immediate access to information that normal people don’t know how to get to or don’t have time to find out, such as how much the house up the street just sold for.  In this case, the Ummels claim that such information was concealed from them.

Whatever its outcome, this case will be interesting.  It might open the door for similar suits if the Ummels prevail, or result in some new rules. 

Your thoughts?

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  • http://orangecounty.redfin.com/blog/author/julie.lance Julie Lance

    You have to blame the buyer’s a little here. You have do some homework yourself. Of course agents like to see a higher sales prices (higher the commission).

    When we bought through an agent, it was like pulling teeth trying to get her to go lower than what was being asked. There were six identical units all on the market… you’d think at least one of them would go down on their price (and one did, by $30k!). However, if we didn’t push our agent to call around, I don’t think we would’ve gotten that price.

  • Anthony

    The final selling price of a home is determined by the SELLER and the BUYER only. Not the agent. In fact the definition of “value” is the price agreed between the BUYER and SELLER. An appraisal is an “opinion” of value. It is not scientific. Many appraisals are made based upon the appraiser’s opinion, which may have been formed without the appraiser wver seeing the interior of the comparable sale properties.

    Notwithstanding the above, the Ummels are sophisticated buyers. The story says they canceled two contracts and fired an agent before they chose to purchase the one in question. Vern Ummel is no slouch. His own resume states: Vern managed a $70 million endowment campaign for the University of the Pacific where the goal was exceeded.

    They knew what they wanted, agreed on a price and bought it.

    Coincidentally, the real estate cycle (a natural occurance) started to decline shortly after they purchased their home. That’s life! If their agent could have predicted it he would be among the smartest people in the world. The press had been projecting the burst of the real estate bubble for years. It occurred later than they predicted.

    Have the Ummels been damaged? Of course not. They have not sold their home and have not been damaged and have not suffered any loss at all. If they hold on to their property for the typical ownership term they will likely feel their home purchase was a bargain.

  • http://losangeles.redfin.com/blog/author/cindy.allen Cindy Allen

    Anthony, I agree that the Ummels are not the most sympathetic of characters. It will be interesting to see how this turns out, since the Ummels are alleging fraud, saying their agent withheld the info about the lower appraisals. The fact that the case is being allowed to proceed must mean the judge thinks there’s something to it. We’ll just have to see.

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  • Chasleon

    I’m in the Southern California market, mostly the Riverside, San Bernardino county areas, “The Inland Empire”. What I’ve noticed is that home values declined since the first of the year and now that interest rates have followed, I’m beginning to see home values stabilizing and more interest by potential buyers to dip their toes in the water.  I believe that most people are beginning to believe that the bottom has been reached and that even though we won’t see price increases, neither will we see anymore decreases, so the item of focus is the interest rates that are offered today. Also, I’ve concluded that “Subject to Lender’s Approval of Short Sales” only seems to possess about 20% of the existing inventory, with Stardard sales, mostly flips, and REO’s and Approved Short Sales possessing the 80%. This lends itself to conclude that the foreclosure absorption rate has taken place, especially in San Bernardino County where most of the Real Estate values originally declined in 2007 and 2008, marking the first in the State to experience devaluations.  Most of the “Subject to Approval” Short Sales have gone to foreclosure and were auctioned off to investors and the rest became REO’s that the banks just are hoping for someone to be willing to take. The Approved Short Sales lost their Buyers due to too long a wait and make up about 20% of the total.  That’s how I’m seeing it.  I don’t really expect the business to pick up much between now and the next election but hopefully we’ll see some improvement afterwards. I always believed this was going to be a long movie, and it looks just like that, so I’m planning on just getting as comfortable as possible and looking for ways to improve my business any way I can. One thing for sure, we’ll be selling homes for the same values two maybe three years from now for what we’re selling them for now, the variable will be the interest rates, and probably those will remain under 6% for a long time.  CHAS LEON, “The Real Estate Guy” with Keller Williams Realty in Rancho Cucamonga, California.

    • http://blog.redfin.com/ GlennKelman

      I agree, the biggest variable is interest rates, not prices.

  • Richard White CA

    I think it would be appropriate to release the income of all employees at Redfin. From customer service reps to web developers to executives. That’s what happens when you should a Realtor’s production, you are telling the world how much money they make yearly. These aren’t corporations, they are individual self employed people – like insurance agents or contractors.

    • http://blog.redfin.com/ GlennKelman

      It’s an interesting point and one I hadn’t considered. We do not and are not allowed to display the commission amounts for each property. But you are right that anyone who operates an independent business is open to more public evaluation, on Yelp and now on Redfin. I had always thought most agents want credit for each property they sell, which is why they have their names in large letters on the yard sign. Isn’t it unavoidable?

  • Renting in Mass

    Nice summary. Thanks!

    • http://blog.redfin.com/ GlennKelman

      Means a lot coming from you RiM!!!

  • Reimund Sauer

    what most people don’t know about mortgage rates!
    the 5 biggest lenders own 70% of the market. Their average conforming rate for 30y is 4.25%
    The survey rate of 4.03% which you find published (including Redfin) is the unweighted average of more than 100 lenders and in a way a misrepresentation, if 70% of all mortgages are not to be found below the 4.25%. So if you want a lower rate you may have to stay away from the top 5 and encourage your brokers to find the lower rates from the other lenders.

    • http://blog.redfin.com/ GlennKelman

      Wow, I didn’t know that either Reimund! Interested in writing a guest post about that? Why are the smaller lenders offering lower rates?

  • Renting in Mass

    The Mortgage Purchase Application Index is at its lowest level since 1996:

    http://www.calculatedriskblog.com/2011/10/mba-mortgage-purchase-application-index_19.html

    That’s pretty remarkable considering that rates are still crazy low.
     

  • Renting in Mass

    Radar Logic’s Composite Price Index declined 0.8 percent from
    July to August, the largest decline for this time of year since the
    crash of 2008.

    http://www.calculatedriskblog.com/2011/10/house-price-indexes-show-price-declines.html

  • Renting in Mass

    I think it’s funny how when seasonality was working in favor of housing prices, the headlines were all “Home prices on the rise,” and then at the bottom of the article there would be a note that seasonality may have been a factor. Now that seasonality is working against prices, the headlines are “As expected, the usual seasonal decline in prices has begun.”

  • http://foreclosureclearance.com/las-vegas-foreclosures/ Las Vegas Foreclosures

    Nice! Just wanted to respond. Outstanding post over again. Thank you Glenn!