Do Do Your Due Diligence (Don’t be like Sergeant Schultz)

We are often asked by Brokers about their agents who are “assisting” sellers in filling out seller property disclosure forms. Most understand that it is a very bad practice to do so, but sometimes many feel they have no choice. The issue raises concerns about agent and broker liability that agents should understand, particularly when they are asked to fill out the disclosure form.

As a general rule, Florida law says if an agent knew or should have known that a representation made to a buyer is not correct, whether or not the agent makes the representation or the seller does it, then that agent can be held liable for damages. A misrepresentation can be negligent (not intentional) or fraudulent (with intention to mislead or withhold correct information).

Some agents take the Sergeant Schultz approach (of the “Hogan’s Heroes” TV show) who repeatedly denied responsibility by saying (“I know nothing. Nothing!”). Today, that avoidance of responsibility may not work. The practice of “ignorant bliss” can backfire.

Here are some suggestions and guidelines for an agent, but each situation and brokerage will be different:

1. Never misrepresent the property condition, boundaries, or size. If you plan to make a representation, then the information should be verified to the extent possible. And if you are unsure, make it clear that any estimates provided are just that.
2. Nondisclosure. Make all existing reports known to the buyer. Disclose anything that can materially affect value or desirability. When in doubt, disclose. As a rule of thumb, if you have to ask an attorney, you probably already know the answer.
3. Seller’s Disclosure. Don’t fill out the disclosure form for the seller, and always have the seller sign the disclosure form. If you fill out the form, you give the seller the argument that they didn’t lie, the agent lied.
4. Covered up, undisclosed or undetected water damage, mold, infestation, or sewage or septic problem. Do not participate in any cover up of defects. If you learn of a prior defect, you should disclose it. You have no idea if the prior defect was properly remedied, and if it was not, you could be on the hook.
5. Home inspection or other inspections. Strongly encourage home inspections, regardless of who you represent. If a professional couldn’t find it, then chances are you couldn’t either.
6. Don’t make representations about permits or zoning or future improvements. While we strongly encourage agents to stay out of the due diligence business,if you are forced to provide researched information to a party from any source, always forward the research material itself and do not endorse it or give a personal confirmation/opinion. Try to include disclaimers that the agent is not responsible for the accuracy of the content.
7. Don’t offer advice outside your realm of expertise. This is a tough one! Parties do rely on an agent’s expertise to guide their decisions. However, for questions that are outside of the agent’s actual knowledge, it is usually best to refer the party to someone who can offer the advice they’re looking for. Opinions can get you in trouble if they turn out to be wrong.
8. Don’t misrepresent or exaggerate a property’s features. If you know that a seller is making false or exaggerated claims, remember that false seller claims or misrepresentations that are repeated by an agent will bring the agent into a lawsuit, as will known non-disclosure of material information. Don’t participate in the cover up.

Remember it is a lot easier to bring legal action against a local realtor/broker than a seller who may live a great distance away, or even overseas. Also remember that agents and brokers are the first people that litigators will look to when they discover a non-disclosure because agents/brokers often-times maintain E&O insurance that will respond to claims. So you all have a very real target on your back! And as always, if you have any questions about a disclosure issue, we strongly encourage you to contact a qualified local real estate attorney for guidance.

Berlin Patten Ebling, PLLC

Article Authored by Christopher Caswell

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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