An Honest Mistake – Lies and Litigation
March 30, 2018 |
Unfortunately, many professionals are not given the luxury of making an honest mistake. The real estate profession is one such profession. Where a mistake is not a mistake, but a lie. Some clients inherently distrust real estate agents (car salesmen and lawyers as well). This distrust leads to an expectation of perfection. Any mistake will be viewed as being done with some ulterior motive, that the client believes is not in their best interest. This puts extra pressure on agents to be sure to take every effort not to make simple mistakes, the consequences of which could be bad for you and your brokerage. This article will look at mistakes, which at the time were both honest and simple, that resulted in either litigation or action by the Real Estate Commission.
- A home was listed for sale. The owners owned an adjacent lot but did not want the lot included in the sale of the home. The listing agent included only the home in the listing contract and in the MLS. A buyer’s agent tendered a purchase contract that listed both the home and the lot as being the property to be conveyed. The listing agent presented the contract to the owners, which they accepted. The home and lot proceeded to closing. Only after closing did the owners realize that the lot had been sold along with the home. The owners sought compensation only from the listing agent and filed a complaint with the Commission. The listing agent was sanctioned for a breach of fiduciary duties to the client. The listing agent also paid a financial settlement to the owner.
- An agent represented potential buyers of a vacant lot. The buyers wanted to know whether the asking price of $80k was supported by recent sales. The agent pulled a report from the multiple listing service of recent sales but limited the results to those sales $20k above the purchase price and $20k below. Upon viewing the report, the buyers proceeded to purchase the lot for $80k. After closing they learned the substantially similar lot next door sold months earlier for $40k. Because the agent had limited the results from the MLS, this sale was not reported. The buyers filed a complaint with the Real Estate Commission and sought damages. Finding the mistake was honest, the Real Estate Commission nonetheless imposed sanctions upon the agent for limiting the report results without informing the client.
- A dual agent received a call from the buyer’s lender that the property didn’t appraise. The lender asked the agent to provide comparable for the appraiser’s review, which the agent provided. The comparables resulted in an even lower appraised value. The buyers terminated the agreement and the sellers sued the buyers for breach of contract. The buyers sued the agent for providing the comparables and undisclosed dual agency. At trial, the agent admitted to forgetting to give the buyers a consumer guide to agency relationships. The jury determined that this contained valuable information about dual agency, which the buyers were not afforded. The jury awarded the buyers damages against the agent and brokerage. Upon learning of the judgment, the Real Estate Commission sanctioned both the agent and the brokerage.
- A buyer’s agent prepared a purchase agreement and noted that $1k in earnest money would be deposited upon acceptance. The buyer was a friend of the agent, so the agent did not request the earnest money at that time, rather intending to get it upon acceptance. The sellers accepted the purchase agreement but despite honest efforts, the agent did not collect the earnest money. The contract fell through and seller sought earnest money from the buyer’s brokerage. Because the agent never collected the earnest money, the agent was sanctioned by the Real Estate Commission.
These are extreme examples, all of which at the time the agent acted, the agent thought that they were doing the right thing. All of the mistakes were honest mistakes. Nonetheless, clients do not interpret agent mistakes as honest mistakes. They interpret them has lies. Although perfection is impossible to attain, it is a reminder that concerted efforts to follow license law and catch mistakes, will avoid litigation and a potential Real Estate Commission sanction.