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Realtor ethics - The dual (or duping) agent

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The Sheriff

Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Arizona
My firm received a request for an appraisal in Scottsdale, AZ, in a highly desirable area known as McCormick Ranch. Sales price on the property was $825K. The property was listed for $900K+ prior to the price negotiation. My staff appraiser does pre-lim research and was like "Houston, we have a problem". I do an independent search myself... and agreed with him.

Anyways, the staff appraiser inspects the property, confirms his initial findings, and completes the report with six comps (all with pools), comes in at $700K ballpark (we had no pool - that's considered obsolescence in my opinion - but that is a different topic for discussion). While doing the inspection, the buyer shows up and states she has concerns that the sales price might be high (not that my appraiser cares... it is what it is when it is all said and done).

I review the report to ensure a second set of eyes have made sure something over $100K low is bulletproof (and I still can't figure why he didn't have any comps without a pool). Two of his comps were within one street in the sub and has closed in May.

Later that day (two days ago), the agent calls and questions the competency of my appraiser (and my firm at that). I told her our conversation would be brief as my client would have to be informed of the phone call if we were to continue... but if she did have "comparable sales" that we might have overlooked, please send them to my email. She went on and on, and then said we had killed the deal. I commented that we didn't kill the deal, the condition and quality of the house killed the deal. She then stated she represented both the buyer and the seller and both parties were upset (like the buyer would really be upset in this case - My client needed this report in two days or the buyer was locked in on a non-refundable $25K in earnest money).

I went and looked one last time for comps... and low and behold, I found an active listing for $685K, totally remodeled (granite & travertine, new cabinets)... the property was on the market for 222 days and was less than 0.15 miles from the subject. Better yet... no pool.

Personally... I think my appraiser may have come high even at $700K (although the report was pretty clean - and one comp does not make a value). But how and the hell can an agent objectively represent both parties without a conflict of interest. The agent just missed out on $49K payday and is understandably upset.

I spoke to my client and shot them the active listing to further substantiate our findings (and they thanked us for not throwing them under the bus).

Why let a sale occur with a dual agent transaction... I understand some areas have limited realtors, but in metropolitan areas, things like this should be banned. I understand the bigger hitter realtors that work the high end market have a loyal client base on both the buyer and seller side, but man, I could see eight out of 10 skippy appraisers in my area making this sale work and not thinking twice. Then, the buyer is ultimately screwed.

FWIW... the agent never did send us any comps... but she said the high ceilings alone made the property more valuable than the slightly smaller house that sold in similar condition with a pool on the same street for $729K three weeks ago.

Dual representation should be outlawed!
 

hglenbetts

Senior Member
Joined
Dec 3, 2007
Professional Status
Certified Residential Appraiser
State
Michigan
"Dual representation should be outlawed!"

Not necessarily. But it does need good checks and balances, like ethical, hard working appraisers.

I've been a Realtor for 16 years and have been involved in several "Dual Agency" transactions.

My question is, why on earth would a dual agent write an offer where the purchaser's earnest money is so unprotected. EVERY offer I have ever written states that if the property does not appraise for full purchase price, the buyer has the right to withdraw the offer and have their deposit returned. Only makes sense, especially in this market.
 

The Sheriff

Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Arizona
Welcome to Arizona... when your industry is heavily jeporadized with phonies who couldn't cut it in other professions, you never know what you'll see when someone is trying to make a quick buck.
 

Wendy

Senior Member
Joined
Feb 23, 2004
Professional Status
Certified Residential Appraiser
State
Florida
First thing I check on sales that seem oddly high or low is for a dual agent.

I'm amazed by earnest money not refundable if the property does not appraise for the sales price. I've never seen that.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Since I am not licensed in Arizona I can't answer your question; however, here in Colorado we have what is called a "transaction broker" who represents no one. That might be the case down there.

Not sure I would agree that lack of pool would be functional obsolescence, even in that market. Now it might be a very desirable feature...and probably should be a basis for selection as comparable.

Just for the record, my step-brother is a highly successful builder/developer in Scottsdale.
 

ZZGAMAZZ

Elite Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
This might seem like a naive question, but: Does a realtor have a legal obligation to attempt to "get a good deal" for their client?

I asked this in a recent thread and received a variety of responses, some saying that the agency relationship in some states does not address this issue.
 

Jennette Picinich

Sophomore Member
Joined
Apr 24, 2006
Professional Status
Licensed Appraiser
State
Arizona
This might seem like a naive question, but: Does a realtor have a legal obligation to attempt to "get a good deal" for their client?

I asked this in a recent thread and received a variety of responses, some saying that the agency relationship in some states does not address this issue.

I don't know about all states, but in Arizona the Agent has a fiduciary duty to act in the clients best interest. That being said it is my humble opinion that the anwser to your question would be yes. The agent has an obligation to attempt to get the client a good deal as I doubt that over paying $100,000 would be in the clients best interest!
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
The agent has an obligation to attempt to get the client a good deal as I doubt that over paying $100,000 would be in the clients best interest!

Not in dual agency!! The broker is acting on the behalf of both, buyer and seller. It's a taught wire act with much greater exposure than being a Transaction Broker. While legal in GA, I do not allow it in my shop. Too great a risk of law suits, and personally... I like the battle of negotiations. :fencing: I prefer to do what I do in REO and act as a buyer broker. :icon_mrgreen:
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
I don't know about all states, but in Arizona the Agent has a fiduciary duty to act in the clients best interest. Which client? In dual agency the Realtor is representing the seller first and the buyer second. I had the great joy of going to a required meeting of Realtors when i joined my MLS. The topic came up and I asked what happens if you have an overpriced property and an uninformed buyer comes in and agrees to the high price. They all said they would not inform the buyer of the inflated price (even though they were now representing that buyer via dual agency). Realtor ethics, give me a break.That being said it is my humble opinion that the answer to your question would be yes. The agent has an obligation to attempt to get the client a good deal as I doubt that over paying $100,000 would be in the clients best interest!

Is anyone surprised that the OP never got an answer about comparable sales from the Realtor? The Realtor had both sides of the deal and was trying to make his/her 6% on a $825,000 deal -- assuming a 50% split with the broker that is about $25,000. Does anyone think the Realtor had anyone's interest in mind but his/her own paycheck? Sad, very sad.

If that Realtor had called me I would arrange a meeting with him/her at their office and ask them to provide comps that support the price. I would shame them into admitting their greed.

Is anyone surprised that Realtors have a worse reputation than used car salesmen?
 

Smokey Bear

Elite Member
Joined
Dec 8, 2004
Professional Status
Certified Residential Appraiser
State
California
I remember reading a study on real estate agents, comparing list price/sale price on properties they sold for others (as listing agent) and selling their own properties. On their own properties they held out for higher prices on their own properties. On other people's properties, just selling it and getting their commission was more important than getting the best price.

I just don't see how anyone but the agent benefits from dual agency.
 
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