by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Hypothetical TV advertisement (aired at 2:00 AM):
Did you overpay for your home? Did your real estate agent give you bad advice?
You may be entitled to damages under a class-action lawsuit if you bought your home between the dates of June 1, 2005 and September 30, 2007. The real estate agent, who received compensation to aggressively represent your interests, may have withheld material information about relevant market data, not limited to but including comparable sales, and current listings, in your neighborhood.
If the value of your home rapidly decreased soon after you bought it, The Coyote Law Firm may help you recover your loss. The Coyote Law Firm has a 27-year history of representing average people, just like you, who were tricked into buying a home by unscrupulous agents. Nefarious schemes, such as your real estate agent securing financing and withholding appraisal reports, may have been the cause for your loss.
Contact 1-811-THE-COYOTE to see if you are entitled to damages.
You had to see this coming. Of course, where else would it start but San Diego?
NB: This is a satirical article. The author knows of no law firm called “The Coyote Law Firm”. Any similarities to any person, law firm or legal business is purely coincidental. The intent of this article is to highlight the complicated nature of real estate advisory and provoke discussion from industry professionals. The opinion is solely of the author (Brian Brady) and not necessarily that of any other author, real estate or mortgage professional, or real estate brokerage, affiliated with this weblog or website.
Kelly Kilpatrick says:
Classic! Your CYA disclosure at the end just about says it all.
January 26, 2008 — 12:13 am
Christy Quick, Phoenix says:
I saw the interview this morning on The Today Show with the “poor, helpless victim” that is suing her Realtor. I am truly surprised she was not asked how many homes she has participated in purchasing a home in her lifetime and if she tried to shirk all of the due diligence responsibilities onto any previous real estate professionals in those transactions as well. And more importantly, when she experienced financial gain on previous transactions (and I would imagine that is the case), did she “share the wealth” upon sale as she is trying to “share the loss” now? Puh-leeeeze … cry me a river!!
January 26, 2008 — 12:19 am
Russell Shaw says:
This is EXACTLY the type of case I would hope the NAR would use every resource at their disposal, including, but not limited to whatever financial help might be necessary, to ensure the plaintiff does not win. All it would take is one dumb case like that to get a judgment and win again at the appellate level to have thousands of Realtors being sued for the same stupid thing.
This IS what paying dues to the NAR is really all about.
January 26, 2008 — 12:30 am
Spencer Barron says:
I saw that poor lady on the Today show Friday morning and couldn’t help but laugh at how unwilling she is to accept any responsibility in what she herself calls ‘the biggest investment of her life’. My emphathy for her faded quickly.
I like your hypothetical ad. I even had a brief uncomfortable chuckle about it. I invisioned the cheesy mid-afternoon/middle of the night style graphics showing the sense of loss felt by the people and of course, the required shot of the person picking up the phone. Nice post.
January 26, 2008 — 12:55 am
Ann Cummings says:
I sure hope we don’t see ads like that cropping up anywhere, including middle of the night, ‘how to make a quick buck’ infomercials.
I’m just wondering where the concept of personal accountability comes into play in this frivolous lawsuit. I missed seeing this on the news shows, but read enough from others who caught it that it sounds like it didn’t play well on the TV. Hopefully that suit will be dropped.
January 26, 2008 — 4:46 am
Doug Quance says:
It won’t be the first time a frivolous lawsuit was brought – and subsequent “damages” paid…
What next? Agents who sue their “clients” for failing to do what is necessary to sell – and therefore do not receive compensation for their efforts?
😆
BTW, while reading your “ad”, I couldn’t help but wonder if John Edwards had something to do with this…
January 26, 2008 — 6:02 am
Breckenridge Realtor says:
Personal accountability is no longer a factor in any lawsuit. Just few years ago the tobacco industry got hammered by lawsuits aggregated by people who are not willing to accept any responsibility for their own decision to smoke.
Attorneys are so quick to find a little loophole in interpreting the laws that protect consumers and start their attacks regardless of the industry type or location. The fact is that even if a Real Estate agent provided MLS printouts of comparable properties and other relevant data, attorneys know for sure that most Realtors did not keep a copy or a log of what was provided to their clients at the time of purchase. Verbal advice means nothing in court unless it was recorded. Therefore, attorneys feel that they can start their attack and hope for the best.
Another aspect is also related to whether the selling agent was a buyer agent or representing the seller as well. If the selling agent is working for the sellers and the buyers at the same time, then the big question is: Who did the agent favor? their sellers? If so, then attorneys are going to point fingers and attack aggressively.
In my opinion the crash is the result of foul-play by the mortgage industry and their fancy products that qualified many people who could not technically qualify otherwise. Given the fact that now everyone can afford a home, we have more demand on real estate and the laws of supply and demand start playing it’s natural ways of driving prices up. Builders and developers started building more homes resulting in more real estate availability and sooner than later, prices are going to go down. Just simple economics. Pointing fingers at real estate agents is absurd and most likely a class-action lawsuit will fail.
January 26, 2008 — 6:51 am
Brian Brady says:
Does anyone think that because the agent acted in a dual capacity, as a mortgage originator, strengthens her position?
January 26, 2008 — 8:16 am
Sean Purcell says:
Brian, great ad. Especially funny in light of the fact that it is probably the lender who should be getting sued in the first place. As a couple of “old school” lenders, you and I know that will never happen… because the lending industry has no fiduciary relationship to the client! What a joke.
I hope posts like yours and asinine lawsuits like this one bring about a little reality. Realtors need to make sure that their clients are getting financial advice from someone other than the 23 year old with the best internet ad. After all, it is the Realtor who gets sued.
January 26, 2008 — 8:26 am
Don Reedy says:
Brian,
All of you who have ever been part of a legal action know that the consequences of any action depends not only on legal theory and statute, but the FACTS of that particular case. So, even though we do not have all the facts in front of us now, it is quite possible that there may be facts that indicated this agent acted to mislead. Quite simply put, her position will be (and CAN ONLY BE) strenghtened IF this agent actually performed outside of his duties to her, particularly with respect to the mortgage origination.
Some of the comments, including Russell’s, are of the utmost importance. NAR must defend against the apparent frivolity of this suit, but your last comment still needs vetting. Afterall, comingling of funds is “no-no” numero uno in our world, and thus comingling of this agent’s real estate duties along with his mortgage duties might provide fodder for this very irresponsible suit. Let’s hope not.
January 26, 2008 — 9:37 am
Allen Butler says:
I think the fact that the buyer was represented by an agent who also acted as a mortgage originator could seriously affect his position. If it is true the the buyers requested a copy of the appraisal and did not get one, that would be particularly damning.
There have been many mortgage outfits over these last few years who have tried to entice the agents in my company into originating loans and earning a small (or moderate) fee. Our broker has flatly said “no way.”
Also, when the market was hot, and our buyer clients were making purchases on homes that were frankly over-valued, our broker insisted that we have our buyers sign a waver of liability, stating that we advised them that the market was very volitile, and as such, we could not stand behind their decision to purchase at the stipulated price.
I think my broker is pretty smart. He covers our asses. That is his job.
Allen
January 26, 2008 — 9:51 am
Bob in San Diego says:
To answer Brian’s question… No, unless it is proven that this agent put pressure on the appraiser to inflate the value of the property.
I know the neighborhood that is in question and the facts are that this area has not gone down in value since she pruchased her home. Without getting into her head, and who wants to go there? I believe her beef is that one month before she purchased her home there was a sale for about $100,000 less in her neighborhood ($1,095,000 vs, $1,200,000 for the same model home).
I wonder if she would be suing her agent if her home was not the most expensive one in the neighborhood?
January 26, 2008 — 10:49 am
Sean Purcell says:
Please pardon my previous comment, I did not know that the subject of the lawsuit was acting as the lender too. Not sure what the official Bloodhound position is on this, but I do not see how anyone can claim to be a full time Realtor and a full time lender. They are both EXTREMELY time consuming if you are looking out for you clients’ best interest. Of course you could be part time at both, but then you are hardly professional.
With this new information I say “sue ’em into the ground”. Let’s face it, the faster we can rid the industry of “double dippers” (whether they be Realtor/lender or dual agent or broker/escrow/title) the better. Imagine if your OB/GYN told you they were going to be your Ear,Nose & Throat doctor as well. Wouldn’t you worry about their level of expertise? More importantly, wouldn’t you worry that they may just confuse which end is up?
Side note: I generally find myself eagerly agreeing with just about anything Mr. Shaw has to say; but the NAR? Isn’t that kind of like hoping the cheerleaders will help out with pass protection in the second half?
January 26, 2008 — 11:02 am
Benn says:
I wont get into specifics about this case, but how about the entire country begin a class action against the Legal community “did your attorney give you bad advice?”
January 26, 2008 — 12:17 pm
Russell Shaw says:
Brian – GREAT post!
Sean – if I have something to say TO the folks at NAR posting it here on BHB is how I get the message to them. 🙂
January 26, 2008 — 12:21 pm
Robert Kerr says:
This case drags the 800 lb gorilla – which we all know is in the room, but no one wants to talk about – into the sunlight: a buyer’s agent has competing interests.
On the one hand, the agent is paid by commission. The larger the sale price, the better the payday. On the other hand, the agent has a duty to the paying client to close the deal for the lowest price negotiable.
This buyer alleges her agent hid information to inflate the sale price. If the buyer can show that to be true, she may win her case.
At the very least, this case highlights the need for a solution to the conflict inherent in the traditional pay structure.
January 26, 2008 — 12:23 pm
Jillayne Schlicke says:
Hmm. Looking at it from another angle, wouldn’t NAR want to make absolutely sure that the agent acted according to the Realtor Code and state law?
If the Realtor did not, then how could NAR (or CAR) come in and help defend her actions? I would think that the Realtor association would want to make sure that the agent DID act according to the industry standards.
If not, then the absolutely should not defend her because doing so would make a joke out of their code, which they say is the reason consumers should select a Realtor instead of just an agent.
If not, then the local CAR ought to vigorously pursue an ethics violation case against her.
Obviously we don’t have all the facts so we’re working with what little we have.
I’m just saying this: If a code of ethics is not enforced, it is worthless.
January 26, 2008 — 12:28 pm
Vicki Lloyd says:
It will be interesting to see how this plays out. I generally don’t like the idea of the agent-lender hybrid. Either profession takes a serious commitment to staying on top of things, and when someone tries to do both, they usually do a mediocre job at best.
If he really denied giving the buyer a copy of the appraisal, and failed to even provide the comps, he should be fried!
January 26, 2008 — 1:16 pm
Brian Brady says:
“This case drags the 800 lb gorilla – which we all know is in the room, but no one wants to talk about – into the sunlight: a buyer’s agent has competing interests.”
Greg or Jeff Kempe?
Sean Purcell- Are you suggesting that the lender is the ultimate authority on fair valuation? If so, what then for cash transactions?
January 26, 2008 — 1:35 pm
Brian Brady says:
Jillayne-
Philosophically, I agree with you. Pragmatically, I agree with Russell.
If this case establishes a precedent, the opportunities for the “Coyotes” (read post) to exploit the system will be astounding
January 26, 2008 — 1:40 pm
Michael Fisher says:
In response to Brian Brady’s question, a big Yes. Acting as real estate agent and mortgage originator just gives the attorney more to cry about to the jury. “The agent had even more commission at stake for the deal to go through” and that is where the peanut gallery will turn off their ears. If everyone stopped arguing about the evils of dual agency and NAR stopped worrying about Big Banks getting into brokering real estate and instead focused on states like California’s DRE that license mortgage brokers as real estate agents maybe we could have saved a few people from themselves in this spec/sub-prime downturn we are facing. When one person represents seller, buyer and also originated the loan, whose interest is he looking out for to make the deal work?
January 26, 2008 — 2:03 pm
Greg Swann says:
> Greg[…]?
Res ipse loquitur:
We might be clean as the driven snow, but we do way too much that makes us look dirty. You don’t have to be wrong to be found against in our insane “justice” system. The best way to avoid the court’s reproach is to avoid even the hint, even the scent of reproachworthy behavior. This is not news.
January 26, 2008 — 2:27 pm
Sean Purcell says:
Brian said: Sean Purcell-Are you suggesting that the lender is the ultimate authority on fair valuation? If so, what then for cash transactions?
Brian, Good God No! Giving lenders authority over the valuation of something they are going to make money lending on is akin to giving politicians the authority to spend money AND the power to tax us (you see how well that works out). Lenders should rely on neutral third parties (e.g. independent appraisers) for value. As a matter of risk assesment they should certainly have the right to accept or not accept that value in light of market conditions, but that is not the same as setting the value.
I was only suggesting that the majority of the time in which you have an unhappy buyer, their unhappiness stems from some financial aspect of the transaction rather than a property issue. Here we have a representative wearing multiple hats and a buyer with too much money, too much time and no personal accountability. You leave me no one to root for… (Actually that is not true. Unfortunately, and despite my desire to “sue ’em into the ground” as I put it earlier, we all have to root for the agent. Mr. Shaw nailed this one on the head: a volatile market combined with our tort system leaves no room for a precendent to be set.)
January 26, 2008 — 3:20 pm
Bob in San Diego says:
Interesting that the NY Times article mentions that another home closed the same day that the Ummel’s property closed, BUT that it DOES NOT mention that that information would not have been public knowledge. Hind sight is 20/20.
Now lets talk about hind sight. Since we are roasting the agent in the court of public opinion maybe we should talk a look at some facts…
Up to the closing date the most recent sales within one mile of the Ummel’s home were one on her street which the NY Times mentions and two smaller homes within 4 blocks that sold the same month she went into escrow. 7133 Tern Pl. sold for $1,230,000 29 days before she opened escrow, and 7143 Tern Pl. closed escrow the same day she opened escrow for $1,365,000. Both of these homes were Smaller then the Ummel’s home. In addition, less then two weeks after they closed escrow another home at 6690 Cabela Pl (which was also smaller)closed for $1,400,000. So, looking at the comps from 6 months before they closed escrow to 12 days after they closed escrow the average sale price was $1,200,625 or $332 per sq/ft.
Without ever seeing the appraisal I can tell you that the information the underwriters should have had for the most recent three sales in her area were, $1,095,000, $1,230,000, and $1,365,000.
January 26, 2008 — 3:27 pm
Joe Hayden says:
Buyer loses case…End of story. Unless it comes to light it can be documented the agent puffed the price in a manner that took advantage of his professional position, the ready, willing, and able buyer sets the market value. Comps just do not tell the whole story…
January 26, 2008 — 3:50 pm
Brian Brady says:
Would the divorced commission argument better define a buyers agent’s role and responsibilities or does the “source” of the compensation already taint the advocacy?
If the latter is true, wouldn’t it be best to revert back to the old model and do away with buyer’s agency? Wouldn’t that better define the principle of “caveat emptor”?
January 26, 2008 — 3:55 pm
Brian Brady says:
“Without ever seeing the appraisal I can tell you that the information the underwriters should have had for the most recent three sales in her area were, $1,095,000, $1,230,000, and $1,365,000.”
That’s probably going to support value of $1.2 million, give or take a hundred grand. (I’m not trying to be facetious). Would this lawsuit see the light of day if the sales price were $120,000 and the variance was $10K?
January 26, 2008 — 4:00 pm
Jeff Kempe says:
Brian …
Great post! I wonder if Julia Roberts will be available to play Ms. Ummel?
[Here’s the Today Show video.]
Divorcing commissions wouldn’t eliminate suits like this; there’s even a (poor) argument that it could exacerbate them, given specific agency responsibility would be contractual. Even though Buyer Agency is established – at least in Oregon law – it comes attached to the sub-agency wink.
On the other hand, when commissions are divorced buyers will be more diligent in their choice of agents, and agents necessarily more diligent in their duties. Just that would eliminate a lot of confusion, and confusion is often the genesis of law suits.
What it wouldn’t do is eliminate entirely the Ms. Ummels. This is someone who pulled out of two other transactions and fired another agent, so she isn’t quite the naif she pretends to be. She’s a nut for whom accountability is a foreign concept.
Incidentally, though the agent touted himself as a mortgage broker, I don’t think he was the broker of record since both the appraiser and the LO were part of the original suit, and settled.
There is one thing that will eliminate silliness like this: Make the plaintiff liable for the defendant’s legal fees should the defendant prevail. I suspect then the husband would be a little less conciliatory…
January 26, 2008 — 5:10 pm
Bob in San Diego says:
“Would this lawsuit see the light of day if the sales price were $120,000 and the variance was $10K?”
I was wondering the same thing.
As I always tell my clients, if I had a Crystal Ball and could see the future I would be a muti-millionare. The best we can do as agents is let our clients know what the facts are and let them decide for themselves.
And by the way, I find it very hard to believe that the buyers didn’t at least know what the asking Price of the home at 1668 Amante. The asking price was on 35 million websites and the listing agent’s phone number was on the yard sign (this home closed escrow the same day their home closed). The buyers probably drove by the yard sign and home a minimum of 6 times (unless they bought their home sight unseen and never attended the inspections or final walkthru) it was across the street from the home they were buying.
January 26, 2008 — 5:13 pm
Wily Coyote says:
Y’all have them po innocent sukkers call me, will ya?
Wily Coyote
Atturney
January 26, 2008 — 6:08 pm
Bob in San Diego says:
Oh btw the asking price of the home across the street that she claims she didn’t know anything about… $999,000 – $1,100,000. It was also on the market longer then the property that Mr and Mrs Ummel bought.
Now, I don’t know if there was NOT a yard sign but I do know that that broker of record does include all of their listings in the IDX feed.
January 26, 2008 — 6:22 pm
Bob Wilson says:
I think the way the real estate industry circles the wagons is pathetic. This case isn’t new. It isn’t the picture that many have painted, where the market dropped and now well over a year later she is bitching about the drop in value. She was been upset since right after she closed escrow and discovered the comps of the other homes once she finally received a copy of the appraisal he refused to give her.
This case is not about loss of value. It is about disclosure and fiduciary. This will come down to the disclosure of material facts. He had a fiduciary responsibility to make sure she had the information he didn’t provide her.
Agents hiding behind the argument that she didn’t do her due diligence are cutting their own throats because this argument off loads the supposed value and role that a buyer agent, at least in California, brings to the table.
Absolutely, but mostly because he refused to disclose the appraisal when she requested it.
I would like to see this industry quit talking about consumer responsibility and look in the mirror.
I hope she wins, and wins big.
January 26, 2008 — 7:31 pm
Brian Brady says:
FWIW, the Ummels put down $900,000 on this home and borrowed $300,000. I’m guessing they didn’t need a full appraisal (1004) but had a drive-by w/o interior inspection (2075); that report requires no valuation but proof that the property is standing. Pure conjecture on my part.
I would think that a couple that has owned property(ies) in the Bay Area, for an extended period of time, who has $900,000 to invest in a home, and holds in a family trust, is sophisticated enough to forfeit the “ignorance” defense.
Again, this is pure conjecture on my part, but I’ll bet they signed an “alternative valuation” disclosure form in their loan docs. If so, that could be the document that exonerates the agent/originator.
My prediction? Our industries escape by the skin of our teeth..
…this time
January 26, 2008 — 8:30 pm
Cameron Wilson says:
Bob,great job on the comps as they show the value that the market bore at the time of purchase.This agent may or may not have given this buyer the comps that is something we do not know at this point because we have only heard her side of the story and you know how stories change once you get into court and most people who bring accusations such as this want to settle out of court and get a few bucks to justify their feelings of geting screwed.As for the agent/loan rep shame on him for two things,#1,20+ years in R.E. and you are now a professional loan officer? Terrible at both! #2,The buyer paid for the appraisal and is entitled to a copy.I have had clients ask for it and had lenders say no and I have to remind them who paid for the appraisal and no copy no close.As far as closing ranks damn right I will until all the facts are in and if this agent loses on the grounds of hoding back the appraisal so be it and I will agree on that point.As for those agents who say you can’t represent both sides in a fair manner I may be old,as Greg says I might be STOOPID,but I have sold R.E.for only 20 years and I can’t tell you how many listings I have taken,sorry Russell need to work on the stats,and the one question I have never asked a seller is what price they will accept nor have I ever asked a buyer how high a price they would pay.Maybe i’m stoopid but it seems fair to me and nobody has ever said they got screwed or that I made too much on the deal.This ain’t brain surgery it’s about ethics and honesty and if I cant bring the two sides together the deal won’t happen but my cliets needs always come first not mine.If any of you are in CA. and you have someone who wants to buy your listing but don’t comfortable representing both sides you are welcome to get in touch with me and I’ll write it and you can bet your butt it will close.
January 26, 2008 — 8:53 pm
Bob Wilson says:
She is not pleading ignorance.
January 26, 2008 — 9:32 pm
Jillayne Schlicke says:
There’s a section in ECOA (The equal credit opportunity act) that directs the mortgage broker to fork over a copy of the appraisal to the consumer, when the consumer asks.
A licensed mortgage broker ought to have known that or at least that’s the way the plaintiff’s lawyer will play it.
Brian, you and I had a spicy conversation about mortgage brokers in Cali awhile back. Don’t mortgage brokers in CA owe fiduciary duties to their clients?
January 26, 2008 — 9:42 pm
Brian Brady says:
“There’s a section in ECOA (The equal credit opportunity act) that directs the mortgage broker to fork over a copy of the appraisal to the consumer, when the consumer asks.”
Within 60 days, Jillayne.
“Brian, you and I had a spicy conversation about mortgage brokers in Cali awhile back. Don’t mortgage brokers in CA owe fiduciary duties to their clients?”
If they operate under a DRE license, the law states that they do. That law, to my best of my knowledge, hasn’t been enforced.
More importantly, the appraisal may not have had a valuation. If it was a FNMA 2075 form (and why wouldn’t it be at 33% LTV?), that isn’t required.
January 26, 2008 — 11:26 pm
Jillayne Schlicke says:
Hi Brian,
Here’s ECOA. Do a keyword search on the word “appraisal” and it will bring you right to it.
http://www.fdic.gov/regulations/laws/rules/6500-1200.html
“prompt” and “reasonable” would not mean 60 days; at least, not to me but I’m not a judge.
“(e) Each creditor shall promptly furnish an applicant, upon written request by the applicant made within a reasonable period of time of the application, a copy of the appraisal report used in connection with the applicant’s application for a loan that is or would have been secured by a lien on residential real property. The creditor may require the applicant to reimburse the creditor for the cost of the appraisal.”
The fact that the agent refused to fork over the appraisal is not good in my view.
January 27, 2008 — 12:45 am
Brian Brady says:
Jillayne,
Thank you for that link. You are a mortgage educator so I don’t need to tell you that lending laws, both federal and state, are often contradictory. That, as you know, is a problem.
I noticed that the link you provided was from the FDIC. I’m no judge, either but I believe that the words “prompt and reasonable” could be interpreted to be 60 days. By the FDIC’s standards, 60 days would be considered “timely and expeditious”. At least that’s the time frame I would expect from the FDIC if I requested something from them.
While this is all conjecture, wouldn’t you agree that the appraisal report requested was most probably a useless document as it related to valuation? I’m betting that the report required for the loan is a FNMA 2075:
https://www.efanniemae.com/sf/formsdocs/forms/2075.jsp
Most 33% LTV loans, funded in 2004, would have either (a) qualified for an appraisal waiver, or (b) required just a 2075. Again, this is conjecture on both of our parts but if the Plaintiff’s attorney hangs his hat on the “prompt and reasonable” delivery of a report that is “not an appraisal report”m the Ummel’s will be smoked out for the opportunists they are.
January 27, 2008 — 9:27 am
Sean Purcell says:
“If they operate under a DRE license, the law states that they do. That law, to my best of my knowledge, hasn’t been enforced.”
Brian, can you please direct me to this law. I do not believe the mortgage industry is bound by fiduciary obligation, as absolutely backwards as that appears. I am betting the DRE law applies to those acting in the capacity of agent but I would love the ammunition of being wrong in this case.
“This ain’t brain surgery it’s about ethics and honesty and if I cant bring the two sides together the deal won’t happen but my cliets needs always come first not mine.”
Bob, I have never met you but in reading your posts and hearing your passion I have no doubt you are one of the good guys. I am sure no one has accused you of malfeasance and for good reason. That is not, however, the point. Your quote above suggests that within dual agency situations you do a fine job of facilitating… but that is not what an agent is hired to do. An agent is hired to vigorously represent their clients financial interests. How is that possible in dual agency when your clients’ interests are diametrically opposed?
January 27, 2008 — 9:32 am
Bob Wilson says:
The unwillingness of the agent to provide the appraisal will be used to demonstrate the lack of fiduciary. The fiduciary duty that an agent owes a principal is extremely high. The fiduciary is obligated to be pro-active in the advancement of the principal’s interests even to the point where it runs counter to the agent’s own interests.
In Field v. Century 21 Klowden-Forness Realty, a landmark case also in San Diego County, the Court of Appeals held that a licensee in a fiduciary relationship with the buyer may be required to examine such things as public records and title documents for the buyer. The Court quoted from an earlier decision that outlined the scope of a real estate broker’s fiduciary duties:
“Counsel and advise” are key here. The agent in the Ummel case could have used the comps in one of two ways – use the other comps to negotiate a lower price, or explain to Ummel why her property was worth more. It doesn’t appear he did either.
January 27, 2008 — 10:35 am
Bob Wilson says:
Sean, to clarify, there are two Bobs in this thread. Bob Crain, who provided the comps and also signed off as ‘Bob in San Diego’ as I usually do, and myself.
January 27, 2008 — 10:40 am
Sean Purcell says:
Bob (Wilson), it was your posts and passion to which I referred, but I am embarrassed to point out that I owe both of you an apology. I was quoting from and responding to Cameron Wilson in my previous comment; not to either Bob. Mea Culpa
January 27, 2008 — 12:16 pm
Bob Wilson says:
It isn’t about the valuation, it’s about the comps that we’re specified in the appraisal. Everyone assumes she would have backed out. We don’t know that. But she was entitled to the information and that option. That is where fiduciary comes into play.
The fiduciary of a lender is nor all that important. However, by virtue of his dual role, the agent took on greater responsibility and liability.
January 27, 2008 — 12:39 pm
Brian Brady says:
Bob Wilson,
What if the appraisal report had no comps?
January 27, 2008 — 2:43 pm
Jay Thompson says:
I’m still not convinced the agent was the lender.
As I discussed here, the NYT article says the agent “encouraged” them to use his lending services. It doesn’t say they did.
According to the Times, the mortgage broker and the Ummel’s reached a settlement.
“Ms. Ummel’s original suit included the appraiser, who was accused of skewing his report to make the Ummel’s house seem worth the purchase price, and the mortgage broker. Modest settlements have been reached with both.”
January 27, 2008 — 3:46 pm
Jay Thompson says:
OK, so apparently Little (the agent) was indeed the lender, per this article from Feb 2007.
“The Ummels are in the process of settling suits with both Contento (the appraiser) and Horizon Pacific Financial Inc., the mortgage brokerage Little was affiliated with when he made their loan. The hearing for that settlement, which seeks $20,000 from those two co-defendants, is scheduled for Feb. 23.”
The Times article said both appraiser and lender had settled. Interestingly, Contento is still listed as a co-defendant in the Ummel’s current case. At least according to San Diego North County Court records…
Just further evidence (IMHO) that the concept of a “combo” agent/lender is a bad idea…
January 27, 2008 — 4:03 pm
E.P. says:
It will be interesting when similar related coverage comes up about people overpaying for their loans here in California. I know of someone who payed over $10,000 in points on a $245,000 or so loan refi and didn’t really realize until a few weeks later well after signing in their busy schedule what percent that amounts to until a realtor friend went over it with them and came to the shocking conclusion that they were charged in reality 5 points and $3000 in general fees. I know real estate brokers charge 6% and below on home transactions, what are loan brokers allowed to charge?
January 27, 2008 — 4:25 pm
Cameron Wilson says:
Sean,we are going away from the intent of Brian’s post a little and that is not my purpose nor point as I made a statement in response to the divorcing of commissions.As this was not the purpose of the post at this time may we agree to disagree between us and look to the case at hand.By settling with others out of court simply shows this buyer is looking to place blame on others for her own perceived notion that she paid too much for her property.She also needs to look in the mirror and accept her role in the transaction as well as the agents part.From the outside looking in the agent may or may not have done a perfect representation for the client but I personally have never had a perfect client and from listening to Mrs Ummell she was not the poor uninformed buyer.
January 27, 2008 — 6:07 pm
Cameron Wilson says:
Since we all have thrown our 2 cents into the pot,myself included,at this point we should now do something to help ourselves as surely the lawyer’s will find our opinions helpful to their case.Russell Shaw made the statement about NAR and he is 100% right and I for one will be getting in contact with them to voice my opinion as they should step up to the plate on a grass roots level and defend a REALTOR who has come under attack.Some of you may disagree but please go over to the DOJ website and see what has been used with our tax dollars to put us all out of business and I personally have worked too hard to build my business to set on the sidelines and let someone else,NAR included,flush my hard work down the crapper.NAR is our association but they need a wake up call or it will be politics as usual with our(your)money.At least the new NAR president lives and works only 80 miles from me and I know how to drive.Anyone want to carpool?
January 27, 2008 — 7:32 pm
Brian Brady says:
“what are loan brokers allowed to charge?”
Generally speaking, 5-6% is the max amount loan brokers can charge (by most state laws). Most lenders limit loan broker compensation to 4%.
The market, however, dictates a 1-1.5% fee to the loan broker for A paper loans and 2-3% for sub-prime loans.
January 27, 2008 — 9:21 pm
Sean Purcell says:
Cameron, “agree to disagree” is well put. As for the NAR I agree with you 100% – especailly about the wake-up call. I fear I am not, however, has optimistic as you. On the positive side, at least Realtors have an association that purports to look out for the public as well as their members. In the lending field we have only a trade association and the protection of the clients is left to the individual lenders.
January 27, 2008 — 9:51 pm
Bob in San Diego says:
I would have to partially agree with what the other Bob in San Diego said…
“It isn’t about the valuation; it’s about the comps that we’re specified in the appraisal.”
Because we only know second hand (via the NY Times article of ONE of the comps on the appraisal) we can only assume it is about that comp (although the NY Times article also brings up the sale that closed the same day her home sold which was NOT a comp). So, it appears that the buyer is only focusing on the homes that are on her street.
Bob W further states, “But she was entitled to the information…”
I would argue that she was entitled to receive information about the sale at 1648 Amante CT along with all the other comps that were in Aviara that sold within 6 months. If the agent did not provide those comps then shame on him.
On the other hand, he did not have to provide her with a copy of the appraisal until after she paid for it (which typically happens through the close of escrow).
So, if the Ummels paid for the appraisal BEFORE the close of escrow then their request for a copy should have been met, but they should have already received a copy of ALL the Comps in area.
Before anyone argues about why they should receive something that they did NOT pay for… Is there any agent or Loan officer here who provides their clients with appraisals that they have not paid for?
Keep in mind that while the buyer USUALLY pays for the appraisal at the close of escrow it is the Lender who still orders it and it is the lender who owns it. This ensures that the appraiser will actually get paid for their work no mater what the value is.
“The fiduciary of a lender is not all that important. However, by virtue of his dual role, the agent took on greater responsibility and liability.”
Absolutely.
January 27, 2008 — 10:20 pm
Bob Wilson says:
Brian, it was reported that the appraisal had the comps listed.
Cameron, I don’t want NAR using my dues to defend agents. Some are good, some are bad. We all know that. I dont want to defend the unethical. I want to see them out of business.
January 27, 2008 — 11:07 pm
Sean Purcell says:
Here in California, as a part of the loan disclosures, the borrower signs a form called “Notice to Applicant of Right to Receive Copy of Appraisal Report” which notifies the borrower that they have a right to receive a copy of the appraisal provided they have paid for it and request it within a specific time period (mine says 90 days, but I may be looking at an outdated copy)
In answer to the question of when they have not paid for it, I have always asked the lender for and received permission to give them a copy. I would not use a lender again that did not allow me to do so.
January 27, 2008 — 11:12 pm
E.P. says:
Interesting, so I think my friend with a 790 FICO got royally reamed since 790 is A paper right?
Quote:
Brian Brady January 27th, 2008 9:21 pm
“what are loan brokers allowed to charge?”
Generally speaking, 5-6% is the max amount loan brokers can charge (by most state laws). Most lenders limit loan broker compensation to 4%.
The market, however, dictates a 1-1.5% fee to the loan broker for A paper loans and 2-3% for sub-prime loans.
January 28, 2008 — 12:19 am
Brian Brady says:
EP:
There are generally three factors that go into underwriting a file: credit, equity, and debt to income ratio.
Good credit does not necessarily guarantee a “good deal”. The points and fees may have been used to “buy-down” the rate. If you would like me to review the Settlement Statement, I can tell you exactly how much the mortgage broker made.
January 28, 2008 — 7:56 am
Frederic A Din says:
Greetings Sean,
The lending industry has several trade associations and one in particular provides consumer protection to home loan borrowers.
“The National Association of Responsible Loan Officers (NARLO) was created to educate consumers about their home financing options and to ensure they understand the financing options available to them. By participating as members of NARLO, loan officers are financing the most aggressive public education effort in the mortgage financing industry.”
More information about NARLO can be found at http://www.narlo.com
Quote:
Sean Purcell January 27th, 2008 9:51 pm
“…On the positive side, at least Realtors have an association that purports to look out for the public as well as their members. In the lending field we have only a trade association and the protection of the clients is left to the individual lenders…”
March 7, 2008 — 2:25 pm
Sean Purcell says:
Frederic,
Thanks for the head’s up on Narlo. I have looked over their web site and their canons. I applaud the efforts of those involved. I hope it turns into something for which you can all be proud.
March 8, 2008 — 2:02 pm
Malok says:
Just saw this article. A great satirical piece. I know it was written in jest, but it really speaks volumes for the way many persons view things nowadays. Suit-happy seems to be becoming more the norm – with someone else being held responsible for whatever decision or action the person made.
May 16, 2008 — 6:31 am