Thursday, January 24, 2008

My House is Worth What?

The NYTimes reported a story that illustrates the tension between regret and blame, a subject of intense interest to lawyers and law students. San Diego homeowners Marty Ummel and her husband filed a lawsuit against their real estate broker alleging that he is to blame for the difference between what they paid for their house and what it is now worth. The Ummels contend that their broker, Mike Little, deliberately concealed the true value of the home to snag a $30,000 commission. Little was a "buyer's broker" with a fiduciary duty to the Ummels. (Although buyer's brokers used to be rare in residential sales, the National Association of Realators (NAR) estimates that they have a hand in two-thirds of all residential home sales.)

Little says that the Ummel's economic woes are not his doing, but rather part of the mess made when the housing bubble burst. Ms. Ummel tesified at her deposition that Mr. Little had told them “many times that [the house] was a very good buy.” “And you believed that?” asked David Bright, the lawyer who represents both Little and ReMax Associates, which was also named in the suit. “Yes, we trusted Mike Little,” Ms. Ummel replied.

This case is big trouble for real estate brokers whose clients often ask for advice as to whether a house is a "good deal." Until now, litigation against brokers from disappointed home buyers mostly focused on undisclosed defects like termite infestation or costly maintenance problems. (The NYTimes reported that the NAR reviwed its records for the last five years and could uncover no cases that revolved solely around the question of valuation.) Post-burst, however, the finger of blame could point toward brokers. In a brief phone interview with the NYTimes, Mr. Little called the case “ridiculous,” adding: “The lady’s a nut job. I didn’t do anything wrong.”


kbp said...

Thanks for the interesting blogs.

Would there not be an appraisal involved in the sale? Most I have ever purchased had one, even required if a mortgage was involved.

I would think such would shift responsibility upon the appraiser.

Marie T. Reilly said...

In this case, as may have been the general practice in San Diego, appraisal was not a lender's condition of closing.