Expert: liznarr - 5/28/2009

Question
Hello,
I have a question on what I can do about possibly suing my real estate agent or pressing charges.  I feel she committed fraud.  The home I was purchasing was appraised at a lower value than what it was listed for.  The lising price was 242k.  The seller's agent represented both the seller and me as the buyer.  She told me the appraisal came in for 235k, and that the sellers were willing to drop the price, and still pay for 2k worth of repairs noted on the inspection.  I did not get a copy of the appraisal until I went in to sign the closing paperwork, at which point I found out the appraisal came in for 233k.  I have emails where she told me that the appraisal came in at 235k.  I believe she told the sellers she would get their 2k back for the repairs by telling me that the appraisal came in at 235k.  Can I sue and/or press charges for this fraud?

Answer
Hi Jodi,

Sorry for the delay in responding to your question.  The All Experts’ system just notified me of your pending question, which I had not previously seen.

If you have emails from your agent telling you the appraisal came in at $235,000, but it came back in at $233,000 (a $2,000.00 difference as you pointed out), it certainly sounds as though you were intentionally misled -- and this certainly would be considered fraud in my opinion.

While you did not specifically state what price you paid for the house, I am assuming you paid $235,000.
I am also assuming that the appraisal for $233,000 was an appraisal done for YOUR lender.

If the above assumptions are correct, I would question why your lender funded your loan if the property appraised for $2,000.00 less than your sales price -- especially if you might have financed 100% on your loan.  However, if a Purchaser makes a down payment that would bring the actual LOAN AMOUNT down to an amount equal to, or less than, the appraised value, many lenders may not have an issue with this.  

In any event, my opinion is that you should have been made aware of the true appraised value PRIOR TO CLOSING if it was less than your sales price.  You were, however, effectively denied the opportunity prior to closing to properly respond to what was misrepresented to you ... again, if the appraised value was LESS THAN your sales price (NOT your LOAN amount).

You would need to speak with an attorney in your area for legal advice, but I would think you could bring an action against this agent AND her company.  The problem comes in with the amount in question being only $2,000.00.  I’m not making light of that amount, but when you get into litigation you can spend $2,000 in a heartbeat.  I do understand, however, that you are a person of principle; and you feel you were violated by an unethical agent.  If you can prove your allegations, she SHOULD be punished by the system.  You should also ask an attorney if you successfully sued, if you could also ask for your attorney’s fees to be reimbursed to you.

Since this agent was representing both you AND the seller, she was in Dual Agency, a very high-risk agency to practice because an agent is representing two different clients with opposing interests:  The Seller wants as much money as he can get; and the Purchaser wants to spend as little money as possible.  

When practicing Dual Agency, an agent CAN NEVER, EVER, advise either party on price and/or terms of any offer being presented.  Very simply put, a dual agent is simply a messenger between the parties during the negotiation process on pricing and terms, and is NEVER to even attempt to negotiate anything related to price and/or terms.  If this agent advised you on either of the preceding during the negotiation process, you have additional charges that you could bring against her.

In addition to legal action, if that is the route you choose, you can also file a formal complaint with your State Real Estate Commission for Breach of Agency if this agent did not follow the rules of Dual Agency to the letter of the law.  Real Estate Commissions will NOT get into financial disputes, but they can and will investigate violations of real estate law (which includes agency breach).  You also can file a Grievance against her with her local Realtor Board (assuming she is a Realtor).  A call to the local Realtor Association office will answer whether or not she is a Realtor.

I hope the above is helpful.  Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth