I came across an article in Bloomberg this morning about a lawsuit in CA in which a buyer claims that a Realtor inflated the square footage of a home that the buyer wound up buying. This is one of the oldest issues in real estate transactions- how big is the home? Different areas have different customs for what is included in these calculations. Here, in OH, it is customary to include only the main living levels, not outside porches, basements, or garages. In Florida, I’ve noticed two numbers- the square footage “under air” and a total that may or may not include outdoor spaces. In the case at hand http://www.bloomberg.com/news/2014-08-20/chinese-millionaire-roils-brokers-over-shrinking-mansion.html , a California community seems to have actually changed, by statute, what is included, and the Buyer and Realtor were not only from different countries, speaking different languages, but on different pages altogether as to what each thought the square footage of this home included.
A much more interesting part of the lawsuit, though, is that the Realtor represented both Buyer and Seller- so-called Dual Agency. When you are hiring a Realtor in a given instance, it is wise to ask who they represent. In Ohio, they can represent either Buyer or Seller, or both. While the Realtor is required to disclose that Dual Agency to you, in a case like this one, it would have been better for this Buyer to have had his own fiduciary representative to explain the issues to him, maybe. It is customary in our state that the Seller pays the costs of the commissions out of the proceeds of the sale- Realtors, unlike lawyers, accountants, or other advising professionals, aren’t compensated for actions taken or services rendered, but by the size of the transaction. So, even a Buyer’s agent has an inverse incentive relative to their client- they get paid more the higher the cost of what the client buys. While the Realtors I know don’t let that influence their service to the client, it isn’t really a very good set up for consumers. I thought when, in OH, they created the Buyers Agency relationship that the industry would move more to a pay-for-service model, but so far that hasn’t happened. Maybe lawsuits like this may re-start the discussion-
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