Minnesota AG argues that recommending home warranties without disclosing financial interests is a breach of fiduciary duty.
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Each week on The Download, Inman’s Christy Murdoch takes a deep dive into the week’s most-read articles to give you what you need to face Monday head-on. This week: Minnesota’s AG argues that recommending home warranties without disclosing financial interests is a breach of fiduciary duty.
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Affordability is a perennial issue in the real estate market, but the cost of owning a home doesn’t end at your closing or your monthly mortgage statement. Unexpected repairs and replacements can increase the cost of home ownership and lead to buyer’s remorse.
To protect against the unexpected, many buyers purchase or ask the seller to provide a home warranty, at least for the first year or two of homeownership. However, the value of these guarantees themselves may be less than expected, especially if the details are certain that most claims will be denied.
As a fiduciary for your client, it is vital that your representation and advice is in the financial interest of your client. Is it even possible to market a product that may not pass inspection and in which you have an undisclosed financial interest?
On November 19, Minnesota Attorney General Keith Ellison announced that Edina Realty, a Berkshire Hathaway-owned brokerage, was offering Home Security of America to customers without disclosing that it had received security payments. The company announced it had reached a settlement with the company to resolve allegations that it advertised home warranties.
Additionally, Edina Realty was accused of misleading consumers into believing that the warranty was an Edina product.
“Real estate agents like Edina are legally obligated to act in the best interests of their clients. After careful investigation, my firm has determined that Edina Realty has “We allege that Home Security of America breached its obligations by secretly accepting large payments from Home Security of America to enforce home warranty contracts on customers who did not have them,” Ellison said in a statement.
As part of the settlement agreement, Edina disputes the AG’s findings and states that “Edina advertises HSA home warranties in exchange for a fixed service fee and that this disclosure was signed by the customer in writing.” “I disclosed it to my customers.”
As the real estate industry comes under increasing scrutiny, business as usual may not always work out. Now is the time to reconsider how we do things and determine whether intentions and practices are aligned and how they can be misinterpreted in court.
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