Q: I am buying a home, and my real estate agent also represents the seller – the same agent is working for both of us. We agreed on a purchase price and went through the entire loan process. But when the lender ordered an appraisal at the very end, the home was valued at $15,000 less than the price we had agreed to pay. My agent told me that the seller would agree to let me have the property if I signed a post closing agreement with him that if I ever sold the property he would want $10,000 from the sale. I feel the agent was edging me towards this agreement and if the seller does not sell at appraisel price the agent misrepresented me. Do I have a legal recourse against the agent? And will I get my good faith money back from the title company?
A: Your instincts are sound, and the situation you’ve described raises serious concerns on multiple levels.
The dual agency problem. When one agent represents both buyer and seller in the same transaction, it is called dual agency. Fifteen states have concluded the conflict of interest is so fundamental that they ban it outright. In states where it remains legal, it requires the written, informed consent of both parties, but it still means the agent cannot fully advocate for you and the seller at the same time.
The appraisal gap is actually your leverage. When a property appraises below the purchase price, the lender will only finance based on the appraised value. That gap – $15,000 in your case – is typically a legitimate exit ramp for the buyer. Most purchase contracts include an appraisal contingency for precisely this reason. Before you sign anything, locate your purchase agreement and read the appraisal contingency language carefully.
The post-closing agreement is a red flag. What your agent proposed, a private agreement requiring you to pay the seller $10,000 from a future sale, is highly unusual and ethically troubling. Rather than presenting you with your contractual options after the low appraisal, your agent steered you toward a solution that protected the seller’s financial interest at your expense. That is the opposite of representation. Depending on your state, this could constitute a breach of fiduciary duty or a violation of real estate licensing law.
Your earnest money. Whether you get your good faith deposit back depends almost entirely on the appraisal contingency language. If the contract contains a standard appraisal contingency and you have not yet waived it in writing, you have a strong argument for a full refund.
What to do right now:
- Stop. Do not sign the post-closing agreement.
- Review your purchase contract and read every contingency clause.
- Here is a Dear Monty how-to-find-an-attorney link – Here is a link to find a mediator. Many mediators are also attorneys. Both are worth exploring before you decide how to proceed.
- File a complaint with your state’s real estate licensing board if the attorney or mediator confirms the agent acted improperly.
You may have legal recourse against this agent. But the most important move right now is getting professional guidance before you take any further action. The $15,000 appraisal gap gave you rights. Make sure you use them.
