Q-I have an ethics question for you. At a Sunday afternoon open house we saw a home we want to own. The agent who listed the home for sale encouraged us to make an offer because, she admitted, her listing would expire in a week. She prepared our offer bid and we gave her a $1,000 check for our deposit. Later that evening she phoned to congratulate us on having our offer accepted by the seller.
But the next day we took the agreement to our attorney. She said the agent was representing the seller and we were not well-protected, such as with a contingency for a professional inspection of the house. Now we realize we bought too quickly. Although we signed a paper which says the agent represents the seller, ethically shouldn’t the agent have suggested we obtain our own agent to represent our best interests?
Also, we now realize we probably offered too much for this house. In a situation like this, can a home buyer expect the listing agent to look out for us?
A-As long as the listing agent disclosed she represents the home seller, it was legal for her to obtain your purchase offer bid for the house. Most states now have laws requiring realty agents to explain who they represent in a sales transaction.
But you raise the more interesting issue as to whether or not a real estate agent can fairly represent both the buyer and seller in the same transaction. Although a lawyer wouldn’t think of representing both parties in a transaction, real estate agents legally can do so.
Obviously, representing buyer and seller is an inherent conflict of interest. But it is perfectly legal. There is no law requiring a home buyer to have a separate realty agent.
As for the ethics of having the seller’s listing agent prepare the purchase offer, there is nothing unethical about doing so. However, the seller’s agent probably encouraged you to make as high a bid as possible. Before doing so, however, she should have shown you recent sales prices of similar neighborhood homes so you wouldn’t offer too much.
Although realty agents enjoy having only one agent in a transaction so they can earn both “ends” of the sales commission, as you discovered, it is very difficult for one agent to be fair to both buyer and seller. In the situation you describe it does not appear the agent did anything improper, but you probably would have been better represented if you had your own realty agent.
Q-For about six years I have lived in a nice two-bedroom apartment. But the building was sold two years ago and the new owner has been “milking” it ever since. My rent is no bargain considering the deteriorating conditions. I have notified the owner about (1) inadequate hot water, (2) mailboxes which don’t lock, (3) broken front door lock, (4) poorly lit hallways, (5) loud late-night parties by several tenants, (6) windows which don’t shut tight, (7) overall poor maintenance and (8) cockroaches coming into my apartment from an adjoining apartment.
The resident manager is sympathetic but says she can’t get the owner to spend money to better maintain the building. Last month, I stopped paying rent and sent the owner a letter demanding repairs and better management. He promptly began eviction. I like my apartment and its location, but what can I do to avoid eviction and get my money’s worth?
A-The apartment building defects sound like your landlord has let the property deteriorate into a slum. I suggest you consult an experienced real estate attorney to protect your tenant rights.
In most states a defense to eviction is “breach of the warranty of habitability.” Your apartment might qualify.
Another alternative legal remedy available in many states is to withhold rent, which can then be used by the tenants to make necessary repairs. However, since most of the defects you list are expensive to correct and involve the entire building, a concerted action by all the tenants would be needed to get results.
Q-We recently bought a home. But our realty agent neglected to tell us before we purchased that the city is proposing to widen our street from two to four lanes. This will greatly increase traffic and decrease the market value of our home.
Our neighbors tell us the city has contemplated upgrading the street for several years. We never would have bought the house if we had known of the proposal. Do you think our real estate agent is liable to us for damages?
A-Real estate agents have fiduciary duties to both sellers and buyers to disclose any material facts which develop during the listing term. If the agent knew of the street-widening proposal, he or she should have informed you. Also, the home seller and the listing agent may have had a duty to disclose the new development to you.
But it is another issue as to whether the agent and/or seller are liable for damages to you and if there have been any actual damages. City development plans often never materialize, so perhaps your street won’t be widened after all. Please consult a real estate attorney for more details.
Q-Several weeks ago, you recommended to another home seller that carrying back a mortgage would make the home sell easily and also be a good investment for the seller. Since I own my home free and clear, if I sell it and carry back a first mortgage, over how many years should it be amortized? Also, would it be possible for me to carry back a mortgage where the buyer only pays interest? That way all my principal will keep earning interest.
A-A seller carry-back mortgage can either be amortized or a “standing mortgage” with no principal reduction and interest only payments. The standing mortgage is especially good for both buyer and seller because the homeowner’s payments are as low as possible, 100 percent tax deductible under current tax law, and the seller keeps all the principal earning interest.
If you decide to carry back an amortized mortgage, many sellers amortize the loan over 30 years with a balloon payment due in 10 years. When 10 years arrives, if the borrower is paying on time and you don’t want the loan paid off, you can extend it.
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Please note: Real estate laws differ from place to place, so you should check local laws before making decisions on real estate problems. Letters should be addressed to Tribune Real Estate Features Service, P.O. Box 280038, San Francisco, Calif. 94128.
