How ‘secret’ home guarantees cost a real estate agent a million: the download
Minnesota’s AG claims that recommending a home warranty without disclosing a financial interest is a breach of fiduciary duty.
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Each week, Inman’s Christy Murdock on The Download delves deeper into the week’s best-read stories to give you what you need to meet Monday head-on. This week: Minnesota’s AG claims that recommending a home warranty without disclosing a financial interest is a breach of fiduciary duty.
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While affordability is an ongoing issue in the real estate market, the costs of owning a home don’t end at the closing table or the monthly mortgage payment. Unforeseen repairs and replacements can cause the cost of home ownership to skyrocket and contribute to buyer’s remorse.
To anticipate the unexpected, many buyers purchase (or ask sellers to provide) a home warranty, at least for the first two years of owning a home. Yet those guarantees themselves may be worth less than expected, especially if the fine print means most claims will be denied.
As a trusted advisor to your clients, it is essential that your representation and advice is in their best interests financially. Is that even possible when it comes to marketing a product that may not be acceptable and in which you have an undisclosed financial interest?
On November 19, Minnesota Attorney General Keith Ellison announced a settlement with Berkshire Hathaway-affiliated brokerage Edina Realty to resolve claims that the company advertised Home Security of America’s home warranties to customers without disclosing that it had received payments for the warranties.
Additionally, Edina Realty was accused of misleading consumers into believing the warranties were Edina products.
“Real estate agents like Edina are required by law to act in the best interests of their clients. After careful investigation, my office alleges that Edina Realty breached this duty by secretly accepting substantial payments from Home Security of America to force their home warranty contracts on unsuspecting customers,” Ellison said in a statement.
As part of the settlement agreement, Edina disputed the AG’s findings, claiming that “it disclosed to its customers in writing that Edina was advertising HSA home guarantees in exchange for a fixed service fee and that this disclosure was signed by its customers.”
The real estate sector is under increasing scrutiny, so ‘business as usual’ is not always enough. Now is the time to reconsider the way you do things and determine whether your intentions and practices align – and how they could be misinterpreted in a court of law.
Inman’s contributions this week focused on what constitutes best practices, optimal corporate culture and building long-term relationships. Review their advice to ensure you always act with honesty and unquestionable ethical behavior.
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