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Honey, Let's Sue Our Real Estate Agent Because Our Home Has Lost Value

Mar 10, 2008
The New York Times reported on January 22, 2008, that a home buyer is suing her agent because she thinks she overpaid for her home. This buyer feels her agent did not disclose that similar homes in the neighborhood were selling for less than what she paid for her home. At first blush, such a case seems frivolous to many, because the decision to buy and the price to offer is ultimately and exclusively the buyer's decision. Plus, no two homes are exactly alike. Even if the homes are close to each other, they may differ in decorating upgrades and maintenance. One home may face a green belt, another may be on a cul-de-sac and a third may have a panoramic view. All these factors can make for unique value variances within the same neighborhood and differances in value.

Is this a case of a buyer trying to recover some of her home's value loss by hoping for a quick settlement with her agent's broker? But, perhaps there is more to this case. Residential real estate is all about sales and marketing. When is the last time you heard a real estate agent say," It may not be a good time to buy real estate?" No, it's almost always "A great time to buy real estate, because ..."

Many in the real estate profession have an unshakable belief that home values can only continue to grow. While sales slowdown and prices stagnate, should this not always be considered buyer opportunities? After all, in the long run, home values always appreciate.

Obviously, these statements are generalities, and even if a home's appreciation is considered sacrosanct in the long run, one must then think about what is long run. I would estimate that the majority of buyers who bought homes or condominiums in San Diego with a 10% or less down payment in 2006 and early 2007, now have mortgage balances greater than the net sales value of their properties. So what is the long run for such a buyer? Will this year, 2008, bring a turnaround in housing values? When December 2008 comes around will many San Diego homeowners have an even larger loss in value than they do today?

So back to our agent lawsuit, is this legal action reasonable? The answer would be hard to ascertain without more details specific to the case itself. If we assume the agent made statements such as "this home is a good buy compared to what similar models sold for recently (or last year)" or if they said, "it's a good time to buy, you're saving thousands over what this property sold for just a year or two ago," this case should be dismissed as frivolous. On the other hand, if the agent knew that similar homes in the neighborhood were up for sale, or sold, for less than the subject property and did not disclose this to the buyer, then this case certainly has grounds to move forward.

In the agent's defense, a bank appraisal of the home's value is almost always standard operating procedure, and in most purchase contracts, it is specified if the appraisal comes in at less than the negotiated purchase price, both the buyer and seller do not have to move forward with the transaction. In other words, it's time for renegotiation of the entire contract!. What usually occurs is either the seller decreases their price to the banks appraisal, or the buyer increases the down payment to cover the appraisal difference. So, if an appraisal was involved in this case, this one factor alone could be proof that at the time of purchase, a third party to the transaction, the lender, thought this home to have the value established at the original purchase price.

In California, where over disclosure is the rule in real estate transactions, it would be absurd for a buyer's agent to not fully disclose all the comparable neighborhood sales data to their principal prior to the structuring of an offer to purchase. The simplistic rule here for all buyers' agents to always disclose significant sales data to their clients as well as condition their sales contracts on an bank appraisal coming in at the full purchase price of the property.

With three decades of real estate sales transactions, I always have my own opinions on which way the local real estate market is heading and freely express them in my blog www.brokerforyou.com/brokerforyou When questioned by potential buyers, I let them know that the only thing I can guarantee is to make an effort to use all my experience to get them the best possible price for the existing market conditions. Where that price or value will be 3 to 6 months, or a year or two down the line, is anybody's guess. There are no guarantees in life and risk is inherent in all financial decisions.

Copyright 2008 Promotions Unlimited http://www.websitetrafficbuilders.com. All rights reserved. any additions/modifications/hyperlinks added to this article will be considered a copyright violation & subject to immediate legal action without further notice.
About the Author
Bob Schwartz, is a Certified Residential Specialist, San Diego real estate broker with w/over 27 years exp. He has a popular San Diego real estate blog Bob's other sites are:Downtown San Diego real estate & San Diego real estate agents.
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