realonomics

Treasury Secretary Henry Paulson has outlined the Bush blueprint that proposes revamping the regulation of the nations financial oversight. Is this plan beneficial to the real estate, mortgage and title industries? Furthermore, how will this impact Wall Street, if at all?

Is this, as Paulson claims, good for “working Americans?” See our previous REALonomics post.

Watch the Paulson video here.

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Back track mentally to 2004 and the market boom.

Meet Vernon and Mary Ummel (ages 71 and 60, respectively), San Francisco area residents.

Enter Mike Little, agent with ReMax Associates in Carlsbad, California, the destination market for the Ummels and their relocation plans. Toss in Geoff Mountain, a co-owner and Broker of the firm.

Fast forward to purchase contract executed by the Ummels in the amount of: $1.2 million.

Add a twist…Mr. Little also managed the mortgage piece for the Ummels.

Factor this…the seller was a real estate agent.

Throw this into the soup: The Ummels claim no comparables were shown to them prior to contract and that better values were available at the time they purchased and the appraisal amount was not disclosed in writing prior to close.

There’s more. The Ummels have already settled part of their suit with the mortgage company and the appraiser. Translation: Errors and Omissions insurance paid off the Ummels..

The claim by the Ummels is that they were duped, so to speak, into buying a home that was not the best bargain in the neighborhood, since others, they claim, were being sold for close to $175k less. The agent didn’t exercise fiduciary, so they claim.

On Monday, the lawsuit lands in Superior Court.

Imagine a jury of peers judging this one…most of whom will own properties in California that are probably not worth what they once were. Ouch!

All the earmarks are here. Agency, disclosure, price opinions, ABAs, RESPA and more.

Is the class action blame-game lawsuit trend about to evolve, complete with vulnerable adult statutes in play and treble damages? Lawyers are no doubt salivating and Errors and Omissions companies shaking in their boots.

According to other news outlets, Mike Little calls Ms. Ummel a “nut job.” Hmmm…not nice. Mike, here’s some advice from REALonomics; if you did say that, shut up.

This puppy could go either way, not because of the validity of the suit but because the consumer (remember them?) (a) loathes the industry; (b) wants to blame the industry for the decline in values; and (c) jurors may be sympathetic for self-serving reasons (their own property values).

Our opinion: The suit, if properly contested with adequate counsel, will fail and we hope the brokerage firm does not settle, which could open a pandora’s box to E&O claims.

Keep an eye on this.

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The heat is going to be turned up today and REALonomics is issuing its first Industry Alert for 2008, a new feature of this blog. All real estate industry participants should track Bernanke’s comments carefully. Tune in to C-Span for details.

It is rare for the Chairman of the Federal Reserve to endorse programs initiated by the Executive or Congressional branches and REALonomics predicts that Bernanke will avoid specific detail endorsements. Make no mistake about it; politicians from both sides of the aisle are looking at the economic situation in terms of potential recession and in true predictable fashion, are calculating political moves that will enhance their longevity.

Bernanke is on fire and under fire. REALonomics is alerting the brokerage, mortgage and title industries to watch this situation closely. More coming! Your comments are welcomed.

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