This is not really new news for many of you , but the story circulating around news organizations and blogs about a buyer who has filed suit against their agent mentions a twist. Aside from the main story is the “smaller” issue that the agent evidently also arranged the buyers financing. At least that is how I interpreted it, although I could be open for correction.
Agency (who is representing who in a purchase and sale transaction for those new to buying) is a tough thing to sort out for some consumers. In Washington State, agency law has gone through several variations and changes throughout the years.
But, when an agent is actually representing a buyer in a fiduciary capacity and then places their loan officer hat on, with no fiduciary duty as of today (could be changing), it makes for some potentially serious complications when things go sideways during a transaction.
Speaking solely for myself, if I were an agent, knowing what I know about the challenges they encounter, there is no way I would ever want to put myself, livelihood or assets at risk by playing a dual role.
I’ve never played with a live grenade before…..but, sheesh, acting as a buyer’s agent and arranging their financing is just not my recipe for fun. It’s exciting enough working in the escrow business thank you very much.
PS. If any of you have not had a chance yet this season to grab your boards out of the basement, do so, because the snow has been superb this season.
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22 responses so far ↓
1
leanne finlay
// Jan 26, 2008 at 11:58 pm
No kidding. I think it is such a conflict for the buyers agent to also be their loan originator that it should be illegal.
2
David McManus
// Jan 27, 2008 at 8:40 am
Let’s also not forget the real estate “professional” who is the listing agent for a particular property and brings some young impressionable buyers to the listing for a looksie. In that sense, he/she is trying to act in both capacities.
As the listing agent, they are trying to get the highest price for their seller. As the buyer’s agent, they should be looking out for the buyers and try to get the lowest price. How they can honestly do this in an ethical capacity simply baffles me. That’s a clear conflict of interest.
3
Ira Sacharoff
// Jan 27, 2008 at 9:54 am
There are also agents who are also appraisers. It’s all “frowned upon” wink wink nod nod, as is dual agency. I’ve dealt with dual agency as a naive buyer, thinking I was going to save money. All I got was screwed by very experienced “professionals”.
4
pat
// Jan 27, 2008 at 10:34 am
This was my situation. Although I was well-studied on buying a house, I didn’t know what was going on when the RE agent was also the loan officer.
She pushed me to get an ARM loan when fixed rate loans were rock bottom and were likely to go up. She also steered me to get the most expensive house I could qualify for.
So, I’m a little unhappy based on what I know these days. However, I did know NOT to get an ARM when fixed rate loans were at historical levels. Also, I was not greedy to get the biggest house I could get.
Buyer beware…and I feel sorry for all of those people who didn’t know any better and got suckered into subprime loans, ARMs, whatnot, and houses they can’t afford.
5
leanne finlay
// Jan 27, 2008 at 10:48 am
David and Ira, there is a long post going on now over in Seattle Real Estate Professionals about Dual Agency. Go read it.
I have a hard time understanding why Ira would have been dealing with dual agency more than one time … can you explain your circumstances?
And, if a real estate agent is also an appraiser, I see no conflict of interest, so long as the agent is not appraising any of his/her own transactions for buyers or sellers.
S-Crow, hope you’re skiing today.
6
david losh
// Jan 27, 2008 at 11:01 am
A large Real Estate company asked me to close my little construction business that prepared properties for sale and I went to a smaller company. We continued to work for Real Estate agents until the Broker / Owner of a REMIX office complained to the Multiple that some how I could “steal” a listing from one of her crack agents.
The issue in both cases was that it was a conflict of interest for me to work on properties that were going to be listed. There was a liability there.
Agents are builders. They build or are partners with town house builders. On top of that the same agent can make the loans for those properties with buyer incentives.
How about that?
Some of those same agents work for the large company that originally asked me to close my business. I guess the numbers have to be big enough to warrant the risk.
7
leanne finlay
// Jan 27, 2008 at 5:52 pm
David, you’re not really clear, but I work with stagers that are also real estate agents, and don’t think their services are a conflict of interest even if they are not Windermere agents, and doubt the NWMLS would either.
Where there’s smoke there’s usually fire.
8
Rhonda Porter
// Jan 27, 2008 at 8:18 pm
Bravo, SCrow. Often times I’ll work with home buyers who don’t want their agent to know how much they qualify for when it’s a higher amount than what they’re looking at for a home. I think the more professionals involved in a transaction looking out for the consumer’s best interest, the better.
Plus, there’s just too much to know with the ever changing guidelines in the mortgage industry these days plus adding staying on top of the RE market? “A Jack of all trades…a master of none”.
9
Jillayne Schlicke
// Jan 27, 2008 at 10:25 pm
HUD and RESPA allow a real estate agent to also act as the loan originator on the same transaction much the way a real estate broker can also own a title or escrow company.
State laws can be stricter than federal laws. If we want this change here in WA state, all it would take is someone to write the bill and someone in the legislature to sponsor it.
This takes an investment of time and money.
I do NOT believe we are likely to see see any money coming from the large trade organizations to make this change.
10
David McManus
// Jan 28, 2008 at 6:48 am
leanne,
I just wanted to know how it’s ethically possible for an agent to work both sides of a transaction as well as hold up their fiduciary responsibility to both the buyer and seller. Doesn’t a Realtor’s ethical code disallow this situation? In any other industry, these types of scenarios are labeled as conflict of interest or simply not allowed. Hell, I can’t even accept gifts, a box of See’s candy, yummy, from vendors because my firm forbids it and it puts forward the appearance of me giving favoritism to certain vendors because of the gifts they provide. Some of my vendors even offer me vacations, but I cannot accept.
But real estate seems to be…..different…….sorry, wrong word…..special, in their dealing with ethical situations. It’s almost like an ethical code exists, Realtors stamp it on their chest, proclaim loudly from the hilltops that they follow it, but at the end of the day, it’s just another stack of papers that gets thrown in the back of their Lexus.
-David
11
johnnybigspenda
// Jan 28, 2008 at 7:24 am
New Home Sales Fall by Record Amount
Monday January 28, 10:09 am ET
By Martin Crutsinger, AP Economics Writer
New Home Sales Dropped in 2007 by a Record Amount; Prices Posted Weakest Showing in 16 Years
WASHINGTON (AP) — Sales of new homes plunged by a record amount in 2007 while prices posted the weakest showing in 16 years, demonstrating the troubles builders are facing with a huge backlog of unsold homes…..
12
Jillayne Schlicke
// Jan 28, 2008 at 2:45 pm
Hi David,
A code of ethics in any profession is a living document, meaning, it should change over time. I sure when the Realtor Code first came out 100 years ago it looked radically different than it does now.
Currently, in regards to originating loans and also acting as a Realtor, the Realtors are directed to act according to federal and state law (among other things like duties of honesty.) Maybe someday if Realtors believe that it would help raise ethical standards, the group would agree to not also act as a mortgage loan originator as well as a Realtor on the same transaction.
Most Realtors I meet who also originate loans tell me that they got into the origination side because they witnessed too many of their clients being taken advantage of by predatory lenders.
We can look at it from another angle. I have met financial planners who originate loans. They don’t do very many deals, and when they do, they charge zero fees that a traditional mortgage broker would charge because they are making up for it on the fees they earn on the financial planning side. Unethical?
Dual Realtor/LO capacity surely speaks to a need for a new section in the Realtor Code that would address the Realtors fiduciary duties to the client in BOTH roles.
13
tom
// Jan 28, 2008 at 2:54 pm
From what I’ve heard many of the Realtor’s at Skyline Properties are also mtg brokers
14
Jillayne Schlicke
// Jan 28, 2008 at 4:46 pm
Hi Tom,
I teach all over Wa state. In the greater Puget Sound area there are hundreds if not thousands of real estate agents that also originate loans as well.
15
common1sense
// Jan 28, 2008 at 6:00 pm
David, I thinkyou were questioning Dual Agency, not an agent being both the real esate agent + the loan originator, correct?
If you call me up and say you want to see my listing, and I show it to you, I legally can only represent the seller, unless the seller gives me written permission to become a dual agent. Since I don’t know you, I have no legal agency relationship with you, just like when you walk into a car dealer and buy a car from the salesperson on site — that salesperson represents the car dealer and not you, the customer.
Do you see why? If you want to buy, you need a Buyers Agent to represent you. I believe in the 80/20 rule. 20% of the agents are the agents that are top-notch, so ask for referrals from people you respect, and interview their agents.
16
Ira Sacharoff
// Jan 28, 2008 at 6:17 pm
Leanne:
how did I happen to deal with dual agency twice?
Well, it was a long time ago, eons before I’d ever dreamed of being an agent. We got an unsolicited offer for our home in Leschi from someone who had a buyers agent. Our home was not on the market, it was not listed, and the buyer requested that we use his agent. That didn’t turn out too badly but i felt uncomfortable that we didn’t really have an advocate only looking after us.
A few months later we looked at a FSBO, but got there too late, the place had just been listed with an agent, and the seller insisted that our needs would be looked after well if we used her agent…this agent was a pain, calling us up too frequently pretending to be friendly but really looking after the needs of her clients (not us).
Yes, I have to take responsibility for my naivete. I should have known better, and it was more of a “feeling” thing, it just struck me that a dual agency would be extremely difficult to pull off, and as an agent I won’t do it.
17
Greg Perry
// Jan 28, 2008 at 6:39 pm
Thousands of real estate agents are not Realtors, and do not subscribe to any kind of “code of ethics”.
Many of the larger companies maintain a “standards of practice” program. I know about Windermere’s, because I work there. A standards of practice committee meets monthly to mastermind around real estate issues and practices to direct the Windermere Standards of Practice. Some real estate companies practice diligent oversight of their agents, and sadly others don’t so much.
As I look back on my career, from a service standpoint, some of my most troublesome transactions were a result of the real estate agent writing the loan.
When I receive an offer from an agent/loan officer, my personal standard of practice is to require the borrower to be approved through my lender of choice. I don’t’ require the borrower to use the lender (of my choice), but I definitely want to make sure the borrower is qualified.
I also had an agent/loan officer who tried to insist on his escrow company because “his escrow company would play ball” with his terms and loan program. It had the smell of fraud all over it. This was a deal we didn’t put together because we wouldn’t “play ball.”
18
David McManus
// Jan 29, 2008 at 6:43 am
common1sense said,
on January 28th, 2008 at 6:00 pm
David, I thinkyou were questioning Dual Agency, not an agent being both the real esate agent + the loan originator, correct?
Yes, I was questioning dual agency, and I still don’t think my question has been answered.
Can the person acting as the Listing Agent be the Buyer’s Agent on the same property?
If answer to #1 is yes, how does the agent hold up his fiduciary duty to both sides. seller = highest price. buyer = lowest price
One word answers are acceptable.
19
Greg Perry
// Jan 29, 2008 at 7:30 am
Dave,
Yes, an agent CAN be a a disclosed dual agent (listing and buyer) on a property. There is a long discussion on dual agency going on right now here:
http://blog.seattlepi.nwsource.com/realestate/archives/130332.asp#comments
20
Greg Perry
// Jan 29, 2008 at 7:33 am
Sorry, here’s the permalink, the other link goes straight to comments.
http://blog.seattlepi.nwsource.com/realestate/archives/130332.asp
21
David McManus
// Jan 29, 2008 at 8:44 am
And does that still apply to husband / wife “teams”?
22
Brian Leavitt
// Feb 5, 2008 at 4:40 pm
Like every service provider out there, there are good and bad. I read the comments and can relate to these experiences because of “issues” on my own listings where an unethical real estate agent has also worked as the loan originator (LO) I operate both a real estate company and a mortgage company. We always put client interest ahead of our own interest and do not engage in ANY practice that is not to the benefit of our client. We offer our service as loan originator to our clients when it is going to save them money, result in a faster and smoother transaction and improve the quality of the overall service that we provide. One of the biggest challenges we have is overcoming some of the objections created by the dishonest and unethical LO’s (and real estate agents) in the industry. As far as “playing with live grenades” there is no “grenade” for the honest agent who knows the mortgage business cold and knows when to refer a borrower elsewhere, for instance EVERY TIME it is in the borrower’s best interest. The reason we created the mortgage company in the first place was because of inconsistent, overpriced, apathetic service. Since 1996 we have originated loans on over 70% of our real estate sales and on average save our borrower at least on third of what they would pay elsewhere. We also believe that true authority withstands questioning and will gladly provide an approval by an independent underwriter when our offers are presented, and yes, we underwrite and fund our own loans. I am sorry that many of you have had bad experiences with agent / LO’s but please consider the source rather then painting all with the same brush.
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