In the age of digital-property listings and auto-population features to input data on the Multiple Listing Service (MLS), realtors may view the listing process as nothing more than an administrative function. But realtors need to be careful. Inaccurate information on a property listing can open the door to a costly lawsuit. Michigan cases are replete with examples of listings gone awry. Realtors should be aware of these common pitfalls in the listing process.
Pitfall #1: Misrepresenting Square Footage or Lot Size
Discrepancies in square footage or lot size may lead to a lawsuit in which a buyer claims that a seller’s agent made misrepresentations in the listing. In Seit-Olsen v Reliance Appraisals, LLC, the buyer sued the seller’s realtor for allegedly misrepresenting the square footage of the house. And in Love v Ciccarelli, the buyers sued the seller’s realtor for allegedly misrepresenting the size of the lot.
Both cases ended with judgments in favor of the realtors. In Seit-Olsen, the Court upheld disclaimers in the listing and limiting language in the purchase agreement. The Court also observed that the discrepancy should’ve been evident to the buyer, who had visited the home several times and hired an independent inspector to appraise the property. And in Love, the Court found that the buyers failed to establish knowledge of the discrepancy on the part of the realtor. From that premise, the Court held that the realtor couldn’t have acted with intent to defraud the buyers.
Pitfall #2: Inaccurately Describing the Property’s Features
Information in a property listing can lead to a lawsuit against the listing realtor in less obvious ways. For example, the buyers in Love also accused the seller’s agent of failing to disclose that the property was subject to a homeowner’s association. And in Rahaim v Denton, the buyers alleged that the listing realtor committed fraud by including pictures of chandeliers in the property listing when the realtor knew that the seller intended to remove them. The realtor in Rahaim successfully defended the lawsuit, in part, because of a release in the purchase agreement.
Buyers’ agents must also be aware of potential inaccuracies in property listings prepared by other realtors, especially when their clients ask them to confirm specific information. In Briggs v Kidd & Leavy, the buyers purchased property that they believed encompassed three lots, including a special garden lot. The buyers’ realtor represented that the sale included the garden lot, but the sellers had actually sold the garden lot and failed to update the MLS listing. The buyers successfully sued their realtor.
Pitfall #3: Failing to Comply with the Terms of the Listing Agreement
In Schwartz v Real Estate One, the seller claimed that her realtor agreed to list the home for sale and rent. But the realtor only listed the home for sale. The seller also alleged that her realtor underestimated the fair rental value for the home. The Court found that providing an inaccurate valuation (or misrepresenting the value of the property) was actionable, as was failing to list the property pursuant to the terms of a listing agreement. The Court reasoned that sellers hire realtors to assess the value of their property in the market.
What This Means for Michigan Realtors
Creative attorneys can turn what realtors thought were routine transactions into costly quagmires. But realtors can take important steps to mitigate their risk of liability:
- Ensure that information in the property listing is accurate. Realtors can reasonably rely on public records for certain information, such as lot size (realtors don’t have to hire a surveyor every time they list a property). Yet realtors may need to rely on their clients to gather other information, such as the fixtures included in the sale. If a realtor becomes aware of an error or misstatement before the sale, failure to disclose that information can subject the realtor to liability.
- Include a disclaimer in the property listing, which emphasizes that the information on the listing should be verified by the buyer. For example, the listing in Seit-Olsen included the following language: “If square footage is a material matter to the buyer, it must be verified during the inspection period.” An “as is” clause is another disclaimer that should be included in the purchase agreement.
- Include a release in the purchase agreement. A release is generally the best protection for a realtor. A court will enforce a broad release in a purchase agreement (g., the purchaser “hereby waives any and all claims” against the seller’s agent). A good practice is to caption the release clause using bold or other emphasis to draw attention to the release.
Claims arising from disputes about property listings are prevalent but defensible. By taking these important steps to mitigate their risk of liability, realtors will be in a better position if they find themselves on the right side of the “v.”