Thursday, January 24, 2008

Unhappy Homebuyer Sues Agent

The opening lines of a news article in the SeattlePI reads, "Marty Ummel believes she paid too much for her house. So do millions of other people who bought at the peak of the housing boom."

With real estate values plummeting in some parts of the country, and as the mortgage industry tries to restore a sense of order after its meltdown, there will no doubt be chaos and casualties, as the market tries to recover. These events will no doubt have a profound effect on the future of the industry, and the way its participants interact. There is so much upheaval and disarray that some would see it fit to cast a shadow over the entire real estate industry. However, I disagree wholeheartedly, because there are many who conduct their real estate businesses as responsible consultants and advisors.

It is time to raise the bar in the real estate industry. Establishing mutual expectations and responsibilities upfront will go a long way to avoid misunderstandings, bad communication, and bad decisions. While I believe that buyers should be responsible for their own due diligence, it is an agent’s job to provide enough data and information to enable clients the opportunity to make informed decisions; including where to find expert advice in matters that go beyond the scope of a real estate license.

When the market heats up, agents should advise against engaging in bidding wars, and if a buyer wishes to ignore such advice, it is better to terminate and walk away from the agreement than to benefit from a buyer’s bad decision. A good buyer’s agent will advise their clients against engaging in such activities that were prevalent in the last housing boom in Seattle. Many buyers were engaging in bidding wars against each other, agreeing to inflated sales prices, getting into adjustable rate mortgages with very little or no money down, waiving inspection and financing contingencies, and subsequently, driving up the values of surrounding homes.

The key is clear and honest communication. By communicating responsibilities and expectations up front, buyers will understand their responsibilities and agents will understand theirs. This will go a long way to foster trust, confidence, and mutual respect in the end.