Saturday, March 19, 2011
Brent White (Arizona) has posted Trust, Expert Advice, and Realtor Responsibility (Real Estate Law Journal) on SSRN. Here's the synopsis:
Real estate agents benefit from the trust associated with portraying themselves as real estate experts, yet are generally not legally responsible for the advice that they give. This lack of legal responsibility is at odds with psychological propensity of individuals to trust perceived experts. It also creates a genuine moral hazard, fueled the housing market bubble and contributed to the suffering of homeowners whose real estate agents encouraged them to buy as the market began to burst. In response to this problem, this article proposes a new regulatory regime requiring real estate agents to choose between two paths: (1) accept legal liability when they negligently, recklessly or intentionally make inaccurate or misleading pronouncements about a home’s value or investment potential; or (2) embrace their role as “salespersons” and refrain from offering advice or opinions about the real estate market to their customers.