It’s getting a little warm in the kitchen of Real Estate
Two questions have been eating at me for some time.
First, one of the most difficult questions to answer deals with my own brethren in the escrow industry. Why is it that a traditionally transaction “neutral escrow company or service” only receives compensation if a transaction successfully closes?
To me, at least in the realm of escrow, this is the mother of all potential conflicts of interest. Isn’t it a conflict of interest to the parties involved and our fiduciary duty to the lender (yes, folks we do have a duty to protect the lender from potential fraud, which is clearly stated in escrow instructions from some lenders) if we are only paid if the deal closes? Wouldn’t that create a lot of problems, particularly if you have pressure from loan officers or Realtors to “just get it done
I’m not a real estate professional, just someone who recently sold my home. The buyers of our home were represented by an agent who was also acting as their loan officer. I’m not entirely sure who usually gets the raw end of the deal in this case, I suspect it is the buyer though based on my experience. This agent/LO was so heavily invested in the sale going through that I don’t really believe he represented them very well. We are honest people and didn’t take advantage of them, but I could see where we easily could have.
Pat: Before commenting on the conflicts you raise, I’m new to blogging. I’d like to link to just your escrow area without linking to the whole raincityguide blog. Is that possible? Please send me an e-mail dcipa@tcsclosing.com.
I hope that real estate agent who was also the loan officer gave all of his customers a RESPA disclosure so they could decide if they were comfortable with the potential conflicts of interest.
What happened to the good old fashioned concept of avoiding the appearance of impropriety?
My mother taught me that healthy competition was a good thing but to remember pigs get fat but hogs get slaughtered. What does that mean? It means do a good job competing to get your bigger market share but don’t try to take it all.
Companies or individuals who compulsively seek to squeeze every available drop of potential cash from a transaction, wearing as many hats as possible to get it, no matter how unethical – have simply lost their way. We need to help them find once again, the ethical high ground or at least we can educate consumers to avoid the hog who wears too many hats to serve anybody well.