Vernon and Marty Ummel bought a home in Carlsbad, for $1.2 million, in 2004. They put $900,000 down and borrowed $300,000. The Ummels moved from the Bay Area to San Diego County to be near their grown children. They hold the property in a family trust. Those facts, gleaned from public records, suggest that the Ummels are far more sophisticated than a garden-variety first-time home buyer. As we used to say in Arizona, "This ain't their first rodeo"
Mike Little, a licensed real estate broker affiliated with RE/MAX Associates and a mortgage originator with Horizon Pacific Financial, represented the Ummels as their buyer's agent as well as originated the loan transaction. He is being sued by the Ummels for fraud. The Ummels claim that Mr. Little deliberately withheld material information about comparable sales and did not furnish them with a copy of the appraisal report.
Marty Ummel is on a public relations tour. She touted her case on the Today Show, this morning. Ms. Ummel believes that Mr. Little should have disclosed that a competing property, closed on the exact same day as hers, sold for $100,000 less. Of course, there was no way for Mr. Little to know that; pending sales, in escrow, do not disclose terms. Those terms are disclosed AFTER the transaction has been recorded at the San Diego County Courthouse.
This case stinks, stinks to high heaven. Greg Swann does the usual excellent job explaining why our industries (real estate and mortgage origination) need to avoid the mere appearance of impropriety:
We say, as a cliche, “Caesar’s wife must be above reproach.” Per Suetonius, what Caesar actually said was, “Meos tam suspicione quam crimine iudico carere oportere.” (”My wife should be as much free from suspicion of a crime as she is from a crime itself.”)
A better way of expressing the same idea: In what light would a plaintiff’s attorney seek to portray this fact pattern?
I want to do what is righteous, always, this before anything. I want to do what is practical, if only to keep all my fat cells fully inflated. I want to do what is marketable — so I can sell even more real estate. But I do not ever want to get sued. Even if the Errors and Omissions insurance underwriter settles out of court, that’s still a huge loss — and not just financially.
For all of me, I think brokers taking kickbacks from — or even ownership stakes in — lenders, title companies, hazard insurance agencies, inspectors, etc., are just asking for it on precisely these grounds — but each man to his own saints.
Greg states the exact reason why I refuse to engage is real estate brokerage. I never want a client to wonder if the advice I give them is in their best interest or in the best interest of the transaction. While they "dual function" agent/originator suggest the he/she "can save you a bunch of money", this case explains how their diluted expertise can cost you many more dollars than the few pennies you might save up front.
This case stinks to high heaven. The Ummels are millionaires, who use trusts as financial planning tools, and have a history of owning California real estate in high-priced areas. They know (a) California real estate is cyclical, and (b) due diligence is required prior to any investment. This is opportunism at it's worst. Their case is frivolous.
This case stinks to high heaven...and it's our fault. As long as we allow California real estate brokers to engage in the business that is rightfully reserved for licensed finance lenders, we'll always be answering the question, "Was there a conflict of interest?"
PS- Read my satirical article about this case, along with the usual expert commentary, on Bloodhound Blog
