It’s not a secret that real estate is a tricky field to work in. With a plethora of things that could go astray, it’s important to work with an experienced broker who knows the law the same way they know the back of their hand. Buyers and sellers are tricky positions to be in and could bring suits against the agent they have worked with for numerous reasons. A few of these include unlawful discrimination, misrepresentation, or nondisclosure of the conditions of the property. Despite the fact that there are more suits every year, brokers are found innocent in over 70% of these cases.
Below, I talk about the most common legal issue brokers face – misrepresentation. As a broker, it’s important to ensure you are familiar with these to avoid facing your own lawsuit. For 9 more, check out Realtor Magazine’s article on the issue. They are a fantastic resource for those looking to get into the real estate market.
Misrepresentation is the number one lawsuit brokers will face in their careers. It seems to make up over 50 percent of cases of all brokers. Misrepresentation means that the broker has falsely represented material features of the specific property or chosen not to disclose critical information about that estate to a seller. An example of these material features could related to the soundness of the foundation, property boundaries, termites or a damaged roof. On the other side of the same coin, disclosures often include problems with a title, renovations that occurred with approval or permit, or erosion of the land.
There are three types that misrepresentation falls under – fraudulent, negligent, and innocent. All three come with serious consequences, even if the broker did not try to deceive either the seller or buyer. So what is the difference between fraudulent and negligent misrepresentation then? Fraudulent misrepresentation is when a broker will hide a negative feature or a flaw of the premises to ensure the sale. Negligent misrepresentation is when an agent will fail to unveil a serious property issue due to ignorance.
In order for a seller or buyer to bring a suit against the agent, the information presented much involve a fact, not just an opinion. Buyers rely on the facts presented to them when calculating if a property is the correct one for them. If they are buying it based off false statements or facts, then they have the right to sue for misrepresentation. Different states have been trying to combat against buyers being duped as well. For example, California requires their brokers to disclose all the knowledge they have about a property and conduct a visual inspection. The results of that inspection must be released to a potential buyer too.
Agents can protect themselves. In order to prevent lawsuits about misrepresentation, it’s encouraged that brokers and their teams use seller disclosure forms. A seller should fill the form out to the best of their knowledge and provide you with it, along with any other form of documentation that provides information about the property. This will help to ensure that if a buyer comes back at you with a misrepresentation suit, the information provided has been thoroughly disclosed to them.