I tell people that I’m a Realtor, but I could just as easily tell them that I’m a researcher of human nature because the real estate process often reveals a person’s true character. Just like Santa, I get to find out who’s good and who’s not as good.

Last week I heard two stories that made me wonder “What would I have done if I was in their shoes?” It’s always fun to play this game because you never know for sure what you’ll do unless you walk a mile in someone else’s shoes and you can never actually do that.

So let’s play a game. Read the two fact situations below just like this is a law school exam. Then answer the questions to the best of your ability (in your head – no need to write your answers down because they won’t be graded). This is an open book exam so feel free to consult any books or internet sources you like. You can even phone a friend. At the end, you’ll find the Marking Notes for TA with the some of the professor’s (me) thoughts about the answers. Good luck!

Situation 1

Aging Arnie lives next door to Happy Harry. Arnie’s getting on in years and decides to sell his house and move into a retirement home. He speaks to a Realtor and then tells Harry that he’ll be moving. Harry tells Arnie that his best friend and next door neighbour from childhood, Friendly Freddy, might be interested in buying Arnie’s home so they could be neighbours again. Freddy speaks to Arnie and Arnie agrees to sell his home to Freddy for $1.3m so the two buddies can be reunited. One month later, Harry and Freddy sell their homes for $1.5m each to Sally and Sandy, twin sisters who had been looking for homes next to each other for a long time.

Questions:

1a)  Did Freddy breach any obligations to Arnie when he bought his home and flipped it for a $200,000 profit?

1b)  Are there any other facts you’d like to know that would help you answer Question 1a?

1c)  What would you have done if you were Freddy and why?

Marking Notes for TA:

Freddy had no legal obligation to Arnie. This was a business transaction. But that doesn’t mean he didn’t breach his moral obligations to Arnie (depending on the facts and on how one defines moral obligations).

The three facts needed to accurately answer question 1a) are these: Did Arnie know that the fair market value of his property was approximately $1.5m? Did Freddy know this? Did Freddy know that Sally and Sandy were waiting in the wings to buy Arnie’s property?

If Arnie’s Realtor told him that the true value of his home was approximately $1.5m and he wanted to give Freddy a deal because of his friendship with Harry, then that was Arnie’s decision and Freddy shouldn’t be faulted for accepting Arnie’s offer. If Freddy knew that the true value of the property was approximately $1.5m and that Sally and Sandy were waiting in the wings to buy it because they had already approached Harry, then one could question Freddy for not disclosing this to Arnie depending on one’s own moral code.

Bonus marks: 5 extra marks to any student who mentions that it’s possible to act immorally even if you don’t break the law and that if a case like this went to trial, depending on the facts, the judge might try to find a way to rule that Freddy took advantage of Arnie and should compensate him.

Situation 2

Ronnie Realtor has been working with Buyer Bob for about a year. Ronnie never sat down with Bob to explain how their relationship would work in terms of commission, negotiations, working with other Realtors, etc. nor did they ever sign a contract relating to these matters.

They’ve looked at approximately 40 homes, but Bob hasn’t found his dream home yet. One day, as they walk out of yet another home that Bob doesn’t like, they’re approached by Neighbour Norm who says “My home’s a lot nicer than that one. You should take a look.” So they did. And Bob liked it. He liked it so much that Ronnie said “I’ll go to my office to prepare the offer and will call you later this aft.”

Bob was excited, but he got to thinking “What do I need Ronnie for? If I go to Norm directly there won’t be any commission and I’ll pay a lower price.” So that’s what he did.

Questions:

2a) Did Bob breach any of his obligations to Ronnie?

2b) Did Norm breach any of his obligations to Ronnie?

2c) If you were Ronnie, is there anything you would have done differently?

2d) What would you have done if you were Bob? Would you have paid Ronnie a commission?

2e)  Would you have paid Ronnie a commission if you were Norm?

Marking Notes for TA:

Ronnie Realtor had no written contract with Buyer Bob or with Neighbour Norm. He will have a hard time enforcing any commission obligations as they were not spelled out in writing. This isn’t to say that Norm and Bob didn’t breach their moral obligations to Ronnie, but everyone has different moral standards.

Ronnie could have avoided this situation if he had sat down with Bob at the beginning of their relationship and agreed, in writing, upon their respective obligations. He also could have discussed the situation with Norm and agreed to a commission in writing before heading to his office to prepare the offer.

Professor’s Notes:

The real estate process is often completely unpredictable. Whether you’re a buyer, a seller or a Realtor, you might find yourself in a situation you could never anticipate. Emotions such as greed and fear can come to the forefront and influence your actions. Because the dollar values are so high, your actions can have a significant impact on someone else’s life. Even if what you’re thinking of doing doesn’t break any laws or written rules, that doesn’t mean it’s the morally correct thing to do. Always remember The Golden Rule and do unto others as you would have them do unto you.

Just last week Bobby and Sue (remember them from Price, Location or House?) were presented with the opportunity to consider a bully offer for well above their list price. The offer was extremely tempting, but they had said at the beginning that they wouldn’t consider bully offers and would wait until offer night to consider any offers. They decided that the right and fair thing to do was to wait for offer night. As Bobby said “Having a guiding set of principles to try and make this as objective as possible is the correct approach.” It’s such a pleasure to work with such good people. I’ll fill you in on now things worked out for them on offer night in the next blog post.

In the meantime, one final thought: It’s always best to confirm anything that’s important to you in writing. It’ll help minimize potential misunderstandings and complications down the road.

As always, if you happen to know anyone that can use the kind of real estate help that involves honest answers, straightforward advice, no pressure and being treated like family, please let me know the best way for me to connect with them because I’d like to offer them this kind of help. And don’t be shy if you have any questions or comments about this post! Thanks for reading.