Misrepresentation is by far the lawsuit that brokers face the most. Misrepresentation is the misstating of some material feature of the property. Another area of lawsuits is Failure to Disclose. Failure to Disclose is just flat out not revealing some important feature of the property.

Here are some examples of misrepresentation: foundation and structural features, property boundaries, previous termite infestation or damage, roof problems, environmental problems (buried fuel tanks), and recent repair items. Failure to disclose could include agency disclosure, title problems, easements, renovating without a permit, and many other disclosures, too numerous to mention here.

Misrepresentations come in two types: negligent, and fraudulent. Negligent misrepresentation includes failure to disclose property flaws out of ignorance. Fraudulent misrepresentation is purposefully hiding a property flaw or feature to make a sale. I might point out that if you are charged and found guilty of fraud, your errors and omissions insurance will not cover you.

When you are asked specific questions about a feature of the house, get the information from the Seller. Then, when speaking with another REALTOR^® or potential buyer say, "according to the seller, the roof has only one layer of shingles". Then follow up that statement with a confirming email, a copy of which should go in your file. To be sued for misrepresentation, the misstatement has to involve a material fact and not just your opinion. Material facts are those that a reasonable purchaser would rely on in making a purchase.

Many courts have said you may rely on statements that the seller makes to you unless you have reason to doubt that what the seller says is true. Many REALTORS^® think they are completely "off the hook" with the Seller's Disclosure. But as many of you know, unfortunately, when someone decides to sue, all parties will probably be named, and if it can be shown that you knew the Seller was not telling the truth on the Seller's Disclosure, you could be held liable.

To limit your liability, keep good records. Make copies of emails in which you are asked and you answer questions about the property. Remember that only the Seller should fill out the Seller's Disclosure; you should not do it for him. If you don't know the answer to a question, admit it. Don't guess the answer. Direct the buyer to sources where he can obtain the information about which he is concerned. We are professionals; we should act professionally, and that means avoiding any chance of misrepresenting facts and features.

See you next week.

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