Friday, April 11, 2008 | A jury sided Thursday with Carlsbad real estate broker Mike Little in a closely watched lawsuit that pitted a local couple against the agent that helped them buy a home. The couple, Vern and Marty Ummel, claimed that Little neglected to mention recent sales in their neighborhood, leading them to overpay by about $150,000 for their home in July 2005.
The case attracted national attention as it posed a hot question: What are the responsibilities of a real estate agent? The real estate camp was concerned that if the plaintiffs won Thursday, it would catalyze and focus a growing urge around the country to find someone to blame — and to hold financially responsible — when houses aren’t worth as much as their buyers once paid. Those who sided with the Ummels worried their case would be chalked up to rich people problems, a matter of a measly $150,000 in the scope of a million-dollar tract home near a golf course in North County.
With an enthusiastic and unanimous response, the jury found that Little had executed a reasonable standard of care when he showed his clients, Vern and Marty Ummel, more than 80 homes in a house hunt that began in May 2005, ultimately leaving them to their decision to pay $1.2 million for their house two months later.
In arguments delivered Thursday morning to conclude the jury trial that began last week, attorney David Bright said his client, Little, was being unfairly blamed for the Ummels’ house dropping in value.
“The Ummels want to own the most desirable house and pay for the least desirable house and have Mr. Little make up the difference,” he told the jury.
At a time when housing market trouble has rocked the global economy, the individual roles of people involved in the basic housing transaction have come under fire. A soaring market this decade hid a multitude of mistakes, a plethora of cut corners and fudged appraisals, because buyers could sell for a profit, nearly no matter what.
But now that the value of housing has come unhitched from what once propelled it upward by double-digit percentages year after year, a spotlight has become trained on the topic of ethics in real estate. Scores of fraud cases, underpinned by inflated appraisals and collusion between buyers’ and sellers’ agents, have landed in national headlines and aggravated bank losses in a major nationwide housing slump.
And arguments in this two-week trial attempted to answer some of those questions: What right did the Ummels have to expect Little to know and tell them about all of the other nearby homes? What duty do buyers have to do their own research, to challenge what their agents and appraisers and mortgage brokers tell them?
At least in this specific case, the Realtor was found to have exercised sufficient care in helping the Ummels find their house, including helping them negotiate other offers they made on houses before they settled on this one. That made an important part of the case Vern Ummel’s admission on the stand that after looking at so many homes, he had a good sense of value in the neighborhood.
As for the buyers’ responsibilities, juror after juror gushed praise for Little and heaped criticism on the Ummels’ failure to research the comparable sales themselves.
Bright argued the trial had illuminated the hard work that responsible real estate professionals, those that have been in the industry for a while, do for their clients.
“I think Realtors are scapegoats for a declining market,” Bright said after the verdict was reached Thursday afternoon. “There are always people out there who will blame someone for something that is beyond their control.”
But Marty Ummel, “devastated” by the conclusion of the case, said the jury’s decision enables real estate agents to skimp on information they provide to their clients.
“I think it sends a bad message to people about the real estate industry,” she said. “Evidently there is not the relationship of trust that I would’ve expected.”
The verdict marked an end of a battle that began soon after the Ummels bought a house on Amante Court in Carlsbad for $1.2 million in late July 2005. They were still unpacking when Marty found on their doorstep one day a flyer from another real estate agent, touting a recent sale of a similar-sized home down the street from the Ummels’. What caught Marty’s eye: that house sold six weeks earlier for $105,000 less than they’d paid.
When they received a paper copy of their appraisal after they bought their house, the Ummels noticed the comparable sales in the neighborhood had not just lower prices, but, in their view, better amenities and larger lot sizes. A few months later, they saw another flier for a house down the street that sold for $175,000 less.
The Ummels contended their agent had misrepresented a reasonable value to pay for their house and had breached his fiduciary duty to them, acting to protect his commission instead of their best interest. They filed suits in July 2006 to that effect against their agent, Mike Little, and Re/Max Associates, the parent franchise of 14 affiliated offices in San Diego County.
The Ummels picketed, carrying signs that exclaimed “Caution, Beware: All Re/Max offices are independently owned,” and “It’s our money; we want justice” to Re/Max offices around the county and even to the Greenwood Hills, Colo., national headquarters of Re/Max.
The original lawsuit named the appraiser and the mortgage broker, who each settled with the Ummels for $10,000.
And though the case was decided in his favor Thursday, the impact of the picketing and the media attention over the last 18 months was significant for Little, Bright said.
“It’s been extremely hard,” Bright said. “Now, when he looks at a client, he’s got to wonder, what’s going to happen? Are these people going to second-guess me?”
Marty Ummel said her efforts weren’t in vain. The jury spoke and the Ummels lost, but she said she was proud of herself for “doing what I thought was right.”
“The fact that there’s dialogue on what Realtors need to do, the fact that it looks like the Realtors don’t need to do as much,” she named as aspects she was happy the case brought to the public consciousness.
And Todd Lackner, a real estate appraiser not associated with the case, said the Ummels had “lost the battle but won the war” when it came to raising questions and delivering a hit to the reputation of real estate agents.
“I think it’s scaring Realtors more than anything else,” he said. “[Little] won the court case, but there’s a lot of other Realtors out there that are very concerned. Not just in San Diego. It’s got to be nationwide.
“I think people are a little bit more skeptical, more concerned, and rightly so,” he said. “If you don’t think this is the right value, don’t do it.”
This article relates to: Housing