Real Estate Agents' "Well-Kept Secret" Creates Havoc For Homebuyers

A 2007 article appearing in International Real Estate Digest reports on the potential financial loss homebuyers face when retaining the services of the wrong real estate agent:

• When Joel Stern of Silver Spring, Maryland was ready to buy a new home he did not know about a well-kept secret in the real estate industry, a secret that can wreak financial and emotional havoc on a home buyer at the most crucial point of his real estate transaction. The secret is that only one out of every three agents provides the mandatory disclosure form that spells out whom the agent represents in the transaction at first meeting or early in the process.

• Two thirds of the agents defy their state laws, which generally require them to provide disclosure, in writing, at their first substantive meeting with a potential client. The general counsel for National Association of Realtors, Laurie Janik, said she was 'so extremely disappointed' in the findings from research the association undertook in 2005 to learn just how the agents were performing in the marketplace.

Syndicated real estate columnist Kennth R. Harney has pointed out in a past article on Mr. Stern's situation that:

• When agents fail to provide the written disclosures mandated by most states, clients may be misled into paying too much, foregoing contractual protections such as contingency clauses, and generally ending up dissatisfied with the outcome of the transaction. Some buyers or sellers end up angry enough to sue.

In Mr. Stern's case, he reportedly found out two weeks after receiving an accepted purchase offer that the Buyer's agent he thought he had was actually working for the seller on the home he chose to purchase. He only found out when his brother, with 40+ years experience in commercial real estate, looked over the paperwork and found that the agent waited until the contract signing to declare her status on the legally required printed agency disclosure form as a seller's agent, according to the story. Further, it turns out that the contract Stern signed was for a home listed by his buyer's agent boss (who also happened to be the agent that Stern had his then-current home listed for sale with), and waived his contingency to sell his own home first, the story states.

Stern currently has a lawsuit pending in a Maryland appeals court against brokerage firm Weichert Realtors as well as the agents involved in which he seeks the return of a $34,000 deposit that he lost in the deal, and $300,000 in punitive damages.

For more, see The Well-kept Secret That Harms Home Buyers.

See also, Kenneth R. Harney: Agents Falling Short On Disclosure.

For recent court cases involving real estate agents being successfully sued (or successfully reversed an unfavorable ruling) in connection with a breach of fiduciary duty and/or failure to satisfy a variety of disclosure requirements, see:

• Washington, DC: Jenkins v. Strauss, 931 A.2d 1026; (D.C. 2007),
• California: Michel v. Moore & Associates, 156 Cal. App. 4th 756; 67 Cal. Rptr. 3d 797; (Cal. App. Ct. 2007),
• Louisiana: Waddles v. LaCour, 950 So. 2d 937; (La. App. Ct. 2007),
• Vermont: Vastano v. Killington Valley Real Estate, 2007 VT 33; 929 A.2d 720 (Vt. 2007),
• Washington State: Ruebel v. Camano Island Realty, Inc., No. 58533-9-I, (unpublished) (Wn App. Ct. 2007).

For a related story, see Real Estate Agent's Alleged Disclosure Failure Lands In Litigation.