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Real Estate Homeowners Are Agitated Over a Fraud Bill That Protects Realtors

Date: November 13, 1996

location: Lawrenceville

Title: Real Estate/ Homeowners Are Agitated Over a Fraud Bill That Protects Realtors

Author: Mukul Pandya

Subject: The state Realtors association backs legislation that protects brokers against charges of consumer fraud. But homeowners say the bill could badly hurt them.

Wendy Jaeger and her husband David Zimmer are a young couple you might meet anywhere. He works for a Wall Street investment firm, while she, a former prosecutor, works at home looking after their year-old daughter. They lived in Pennsylvania until 1993, when Zimmer”s company transferred him to Manhattan. After considering a move to Connecticut, the couple decided to look at New Jersey. In the summer of 1993 they met a Weichert Realtors agent who introduced them to the Princeton area. Eventually, Jaeger and Zimmer found what they thought was a dream Colonial house in Lawrenceville. They bought it for $500,000.

Today that dream house has become the couple”s worst nightmare. In the rain its roof and windows leak, and in the winter, snow creeps under the doors. The air-conditioning and heating systems work so poorly that rooms bake in the summer and freeze in the winter. When this first happened, Jaeger and Zimmer wondered how a new house could have such problems–until they learned a stunning fact. Though Weichert had listed the home as being new, it was built seven years earlier and sat incomplete and vacant while its original owner, Kun Cho, sued the builder, Timberline Property Development, as well as Weichert, for construction defects.

As Jaeger and Zimmer probed deeper, they had other nasty surprises. For example, they found that they were not the only residents of their development–Squires Runne, now called Bainbridge–with problem homes. Four other families–those of Roxanne Gennari, Rajan and Grace Matthews, James and Joan Nestor, and Raymond and Janet La Chapelle–had found major faults in their houses. These families had sued Timberline and its owner, Allen Rumberg, who had declared bankruptcy and left the state. Also part of the lawsuit, filed in the Superior Court of New Jersey in Mercer County, was Rumberg”s wife Ellen, a Weichert agent, and Weichert Realtors.

The Bainbridge residents won this case in May 1992. In his decision on this case in May 1992, Judge Andrew J. Smithson said Weichert had “engaged in the making of material misrepresentations.” Weichert appealed, but lost–and the case is now before the state Supreme Court. Jaeger and Zimmer, too, have now sued Weichert. Experts reckon that fixing the problems in their home will cost $190,000.

Weichert spokes-woman Denise Smith says her company has no comment on these lawsuits. But for Jaeger, Zimmer, Gennari and other Bainbridge residents, the legal battle against Weichert has acquired a wider dimension. The New Jersey Association of Realtors has sponsored a bill in the state legislature–introduced in September by Republican Gerald Zecker in the Assembly and Republican Andrew Ciesla in the Senate–that is aimed at limiting the liability of brokers in consumer fraud cases. The bill requires homeowners to prove that brokers had actual knowledge about defects before they can be found guilty of consumer fraud.

Greg DeLozier, state legislative director of the New Jersey Realtors Association, says the association drafted the bill in response to the appellate court”s judgement in the Bainbridge residents” case. He explains that its purpose is to protect brokers against situations where “irrespective of knowledge, if a broker makes a misrepresentation, it constitutes consumer fraud.” Jaeger and her associates, however, are worried that if the bill is passed, it could hurt thousands of homeowners. “Passing the bill could rob homeowners of the very little bit of protection they now have,” she says. “It would create a profession of ostriches–Realtors who stick their heads in the sand and become intentionally ignorant of their surroundings.”

Jaeger has been on a mission to make politicians see this point of view. She and a group of Bainbridge residents–including Zimmer, Gennari and the Nestors–met Senator Dick LaRossa on Nov. 7. to explain why the bill will hurt homebuyers. Peter Guzzo, a director of Consumers for Civil Justice, a coalition of organizations like the American Association of Retired Persons and New Jersey Citizens Action, who attended the meeting, supports their efforts. “We are concerned because this bill would close the door on victims seeking remedies against injuries,” Guzzo says.

A key issue at the meeting with LaRossa was why brokers should be held culpable for what they do not know. Observed Nestor: “When you go to a real estate agent, you expect the agent to know something about what they are selling.” Asked Jaeger: “Why else do we pay them their 6% commission?” The residents argued that if the bill is passed, it will provide brokers with an exemption that would be unacceptable in other professions. Said Zimmer: “I work in the securities industry. If I pitch a bond as being wonderful, and you buy it, and it blows up, the Securities and Exchange Commission and the National Association of Securities Dealers would get involved in my case. I made statements to you, and I am held accountable for them. That is what this bill rips out.”

LaRossa suggests that a solution to the dilemma might be to have a disclosure statement that requires home sellers and brokers to provide information to potential buyers. “A disclosure statement becomes an affirmative statement,” LaRossa told the residents. He also wants to wait for the Supreme Court decision in the Gennari case, which will influence these issues. “I”m going to look at an alternative piece of legislation with a disclosure statement,” he says.

Gennari, a top-selling broker at Hamilton”s Richardson Realtors, believes that the problem of what brokers know or do not know can be resolved if they act ethically. If a seller tells a broker something about a house, and the broker does not know if it is true, all the broker has to do is to say that to the buyer. “All I have to say is that I do not know. I”m not an architect or an engineer,” she says. “I just have to stick to being a Realtor. There is no reason to lie.”

Over the coming months, political forces will swing back and forth to decide the bill”s fate. The final outcome will affect not just Bainbridge”s residents, but also every broker, home buyer or seller in the state. Jaeger and Zimmer, meanwhile, are hoping that people like themselves will not lose out. Says Zimmer: “This has been a very frustrating experience.”
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