‘Check this out!’

Ever told your client to ‘Check this out!’? This might get you sued… Brand new legal case: A buyer’s broker’s advice to “check [a report] out” is insufficient to avoid liability. However, there is no liability for listing broker’s accurate and true MLS Statement.

This morning an e-mail from CAR realegal caught my eye and in particular an article about the Broker’s MLS Statement. I wanted to share this article with my fellow real estate agents (and in particular buyer’s agents) as this case is so very relevant to all of us!

Broker’s MLS Statement

This case involved the sale of a vacant property in an earthquake zone. The seller’s broker stated in the MLS “This parcel is in an earthquake study zone but has had a Fault Hazard Investigation completed and has been declared buildable by the investigating licensed geologist. Report available for serious buyers.”  All of which was true.  The problem, however, was that the report was from 1982 and in the interim were the Loma Prieta and Northridge earthquakes; much had changed in the building standards from then to the sale of the property in 2006.  After closing, the buyer found that he could not build. He sued his broker, the seller and the seller’s broker, alleging that omitting the date of the report was a misrepresentation. The trial court found the buyer’s broker liable for breaching the fiduciary duty to the buyer. The seller and the seller’s broker where held not liable.

Buyer appealed only as to the seller’s broker. Following prior case law, the court found that, while a real estate broker owes their own client a fiduciary duty, they owe third parties who are not their clients only those duties imposed by regulatory statutes. These duties include honesty, fairness and full disclosure as well as the Civil Code section 1088 responsibility for the truthfulness of statements in the MLS. The court found that the statement was in fact true. There was a report. The geologist did find the parcel buildable. And the fact that the MLS did not state that the report was from 1982 was cured by the report’s availability, especially so when the report was dated May 20, 1982 on its face. The court held that the seller’s broker had met the requirements of honesty, fairness, and full disclosure.

The buyer’s broker, however, did not fare so well. The buyer’s broker merely gave the buyer a copy of the report, telling the buyer to “check it out.” The court states that the buyer’s alleged injury arises from the failure to investigate and understand the implication of the information that the report dated to 1982, a failure that the trial court found was the buyer’s broker’s responsibility, and not from the failure of the seller’s broker to provide information. Certainly something beyond “check it out” was required of the buyer’s broker.

So what can we do to avoid these kinds of situations?
1. Read the documents yourself! It is your duty to read the disclosures that are provided to your client!
2. Make sure to have your client sign a document stating that they have read and received the report.
3. Have it in writing (for example e-mail) that you told your client to read this report diligently and include the date of the report. Make sure you keep your client’s response to this e-mail as well, so you can prove it was read by your client.

These are just three (obvious) options. But remember that I am not a legal counselor. So please consult a lawyer or legal counsel if you have legal issues and wish to know how to better protect yourself from a legal standpoint.

Saffie v. Schmeling, filed March 7, 2014, Fourth District, Div. Two, 2014 S.O.S. E055716 http://www.metnews.com/sos.cgi?0314//E055716

About Jaleesa Peluso
Jaleesa Peluso is a Laguna Beach Realtor®. As a Laguna Beach Realtor Jaleesa specializes in coastal homes and luxury home marketing. For more information about Orange County Real Estate or Laguna Beach Real Estate, visit: www.jaleesapeluso.com
Contact: (949) 395-0960 or Jaleesa@JaleesaPeluso.com