Walking Away Scot-Free: Trust, Expert Advice, and Realtor Responsibility

Abstract

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. This article proposes that real estate agents be required to accept legal responsibility for their advice or be required to represent themselves as mere salespersons.

Keywords: real estate, experts, trust, realtors

JEL Classification: K11, K13, K23