Question Details

jme_theguy, Home Buyer in Dallas, TX

Unethical or not? Only seasoned & knowledgeable agents need answer this one...

Asked by jme_theguy, Dallas, TX Fri Jun 28, 2013

I'm under contract to buy a house with an FHA loan. The seller previously sold the home to an FHA buyer three weeks ago, but the deal fell through because the appraisal came back wayyy too low. The FHA appraisal was logged and stands for 6 months. The seller lowered their price and now we are under contract. My agent specifically asked the listing agent at the very beginning of the transaction (in writing) if the first buyer's loan/appraisal was FHA, to which the listing agent responded "No." Now we find out this was an outright lie. My agent is pissed off. My loan officer is pissed off. I am pissed off. We've already paid the earnest money and paid for a home inspection. As a buyer, I can't afford to make up the difference in price. I wan't to skin the listing agent alive if the deal doesn't go thru, and I know how to do it. I think I have a case. What do you people think?

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JME-The Guy,

My question for you and your Realtor is was the previous appraisal a material fact. If it sticks to the property for 6 months I believe that it is and so should have been disclosed the second your offer came in with FHA financing addressed in that offer, was it mentioned in the offer you were going FHA? You should have your agent contact the state real estate commission and ask. You should get back your money spent since they did not tell you if they feel it was a material fact and all signs point to it being so. My guess is the seller had a new agent not familiar with FHA rules. This will force them to learn.
1 vote Thank Flag Link Fri Jun 28, 2013
Thanks Tim. Yes, the FHA financing was very up-front from day one. Does it matter if it's a material fact when they lied in writing? I guess that is the golden question...
Flag Fri Jun 28, 2013
What you have experienced is EXACTLY why FHA backed loans are NOT COMPETITIVE.
As you correctly stated, the consequence of this failed effort will attach to the house for a very long time. The SELLER must endure the consequence of the financing choice the buyer makes. Both of those FHA backed offers should have been kicked to the curb, IMMEDIATELY!
So, how would the outcome be different if YOU WERE THE FIRST BUYER?
The outcome would have been the same. The appraisal would have come in low. You would refuse to pay the difference. Your money spent would be gone.
The best way to identify a 'fair' mess is when everyone is unhappy. You need to understand the issue is with the financing choice you made. The only issue I have with the listing agent is the failure to counsel the seller to reject FHA financed offers. Stuff happens. This time it happened to you.
When you make your next purchase offfer, make sure you know how it will appraise and position yourself accordingly. FIAT appraisals are predictable.
Are you aware a buyer CAN and often will change lenders and structure AFTER the offer is accepted.
They use a local lender prequal and switch to Qicken Loans before closing.
There is too much we do not know.
1 vote Thank Flag Link Fri Jun 28, 2013
So, if I were to hire you to be my buyer's agent, would you "kick me to the curb-IMMEDIATELY" once you found out I had FHA financing? What if that's all I could get?

My guess is that you're gonna take that commission any way you can get it.
Flag Fri Jun 28, 2013
I am confused by the things you are saying. OK, there was a contract that fell thru when the FHA appraisal came in too low. Then you come along and you said the seller dropped his asking price which I assume is because the appraisal came in low. Did they drop it to the appraisal price - you don't say. Are you going with a FHA loan or something else, I am trying to figure out why you are upset and why your agent is upset. Did your loan fall apart? Please give some more details to help us understand.

So far my biggest concern would be to decide if a previous appraisal was a material fact that needed to be disclosed to you. That, to me, would be a good question but mainly one to get you out of the deal. What value did your appraisal come in for?

I have never heard of an appraisal being good for 6 months, that part surprised me and I would be curious to hear from some lenders on that.
1 vote Thank Flag Link Fri Jun 28, 2013
Yes, the response was in writing also.
0 votes Thank Flag Link Fri Jun 28, 2013
you state that your agent asked in writing and the listing agent responded "no." was the response also in writing???
0 votes Thank Flag Link Fri Jun 28, 2013
Yes, response is in writing. Do you think I have a case?
Flag Tue Jul 2, 2013
I would count a lie as unethical. Since it was in writing, I would suggest you file an ethics complaint with the local association of Realtors. Article 1 of the Code of Ethics is Protect and Promote your Client's interests, but be honest with all parties. Article 2 is Avoid Exaggeration, Misrepresentation and concealment of Pertinent facts. You might want to talk with a real estate attorney about the practicality of filing a lawsuit against the listing agent to recover the money you are out.
0 votes Thank Flag Link Fri Jun 28, 2013
One thing that hasn't been broached;
Did you have your Realtor do a CMA before you made your offer?
If you had, you would have seen the discrepancy between the LISTING PRICE and the Market Value; that would have been a Red Flag for you.
You assumed that the List Price was a working figure.
I would never let my Client assume anything!
0 votes Thank Flag Link Fri Jun 28, 2013
Yes, a CMA was done. It was difficult because the owners had added a substantial amount of SF onto the home which was not comparable to anything in the immediate area. I believe this is why the asking price was reduced, because the idea of recouping the investment of the addition was not realistic.
Flag Fri Jun 28, 2013

You're not getting it...

It matters not that I was the 2nd buyer. I know full well the pros and cons of FHA financing. Had I been aware of the first buyer being FHA and of the low appraisal, I would have walked, so as to not repeat the scenario of the first buyer. And I COULD have, had the listing agent been forthright. But, this person chose to tell an untruth.

How is this listing agent providing good service to their clients?

The deal has not fallen through yet. I'm waiting to see how the listing agent deals with their deceit first. In my book what has been done here is unethical any way you slice it...
0 votes Thank Flag Link Fri Jun 28, 2013

Uh, no I'm not looking for someone to blame, I just don't like being lied to. Would you? I'm not buying a candy bar at 7-11!

I'm FHA. Previous buyer was FHA. FHA appraisal is six thousand lower than accepted offer. FHA appraisals, as long as they are logged by the lender, stick for six months.

The point of this is, if I had known the previous buyer was FHA, then I could have kept looking for another house and saved the money I already shelled out.

I am not sure if this sort of thing HAS to be disclosed...but there indeed IS a difference between non-disclosure and an outright lie (in writing, no less).
0 votes Thank Flag Link Fri Jun 28, 2013
You're right Tim;
I think they are looking for someone to blame.
0 votes Thank Flag Link Fri Jun 28, 2013
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