Agent completely fails his buyers
Originally appeared in Bay Area News Group publications on May 5, 2017
It is easier to do a job right than to explain why you didn’t.
– Martin Van Buren
All agents are not equal. That should come as no surprise, but few real estate buyers and sellers have any inkling of how some licensees can and do cause great harm to their clients.
As a Northern California real estate expert witness and veteran of the business, I have seen many clients hurt by the very person who should have been protecting them. The following true story, from a real estate legal dispute where I was the plaintiff’s expert witness, illustrates how much damage the wrong agent can do and why you need to be extremely thoughtful when you choose one.
Buying in a seller’s market
In this market, buyers tend to focus on “winning” the bidding war more than ensuring they are purchasing a quality property. This was the scenario for a couple who bought an older home in the Bay Area. The sellers had purchased it as a “fixer” and, over a period of time, remodeled and expanded the house. Significantly, none of this work, including room additions and structural modifications, was done under permit (as required) and it was not in compliance with building codes.
Despite unacceptable seller shortcuts, the rehabbing had transformed the home’s interior and made it very appealing to prospective buyers. Based on this, and the hot market, the accepted contract was at a much higher price than neighborhood comparable sales. In a previous article, I said, “…it is easier to buy the most expensive home in a rising market than it is to sell for the same amount or more in a declining market.”
Buyers’ agent’s failures
California law requires sellers to complete and provide buyers with a number of disclosure documents. A critical one is called the Real Estate Transfer Disclosure Statement (TDS), on which the sellers noted the lack of permits and that there was work not done to code. These are major red flags.
Once the TDS and other disclosures were received, their agent should have immediately advised the buyers on the risks of acquiring a property with extensive remodeling and expanding without permits. He should also have alerted the buyers to the health, safety and investment risks of a home where work was not done to code. This can result in a fire due to defective wiring, noxious gas poisoning from an incorrectly installed furnace and/or hot water heater, as well as other potentially serious problems. The buyers should also have been counseled that, when they sell, especially in a slower market, other buyers may heavily discount the price due to code violations and lack of permits.
Further, the salesman representing the buyers should have known and explained that, when sellers do extensive work themselves (or hire others) prior to selling, there is a large risk. This is because many sellers will want to pay as little as possible, as opposed to paying more for a top-quality job. When the house is bought as an investment to be fixed up and resold, as in this case, that gamble is even greater for the buyer.
None of these points were made to the buyers by their agent. Worse, the buyers decided not to hire their own home inspector(s) because the sellers had provided a pre-sale home inspection report. If there was ever a scenario where buyers needed their own inspectors, this was it. Inexplicably, their agent did not tell them what a mistake they were making.
The buyers’ headache
After close, the buyers discovered numerous, expensive issues with inadequate work by the sellers and with needed work not done. The sellers had not disclosed many of these problems. It took years and a lot of money for the buyers to rectify these conditions and they were so disgusted after going through the process that they decided to sell. Adding to their woes, it sold for substantially less than they had paid.
Obligations of agent and broker
Brokers are responsible for the policies of their company and the actions of their agents. Clearly, it is a good business decision for a broker to insist that all of his/her agents operate in the best interests of their clients. Regardless, the broker and agents have a legal obligation to do so.
During deposition, there were questions concerning why neither the agent nor broker advised the buyers about warning signs that should have been obvious to these real estate professionals, but not to the buyers. Shockingly, the broker and agent both said that the buyers were “adults” and were responsible for making their own decisions. In fact, a buyer’s agent has the obligation to make sure that his principal (the buyer) understands the importance of the information provided by the seller. Too many licensees do not provide this assistance to their buyers.
Space does not permit me to include many other deficiencies of the buyers’ agent and his broker. This is the most egregious example I have seen, despite others that come close, of a licensee failing to act in his clients’ best interests. It is a textbook case of agent incompetence and lack of caring for the buyers and I will be including this in my future classes of new agent training.
When it is your time to buy or sell, make sure to take responsibility for working with someone who knows what he/she is doing and will use that knowledge for your benefit.
In case you are curious, the buyers prevailed in this action and received significant payments from the sellers and the buyers’ broker.