Did You Overpay Due To A Real Estate Agent’s Misrepresentation?: The Case of the Fake Engineering Report

Posted By on September 1, 2015

Last Update: 04/18/16

When a real estate agent makes a mistake or for some reason provides a buyer with incorrect or misleading information in Florida, they (along with their broker and even the seller) may be held liable for any resulting damages to that buyer under a claim of “negligent misrepresentation.” The situation becomes much more serious if the misrepresentation was intentional; if the agent consciously provides bad info to the buyer, it is more than a human mistake, and the consequences are more severe.

Intentional misconduct forms the basis for a legal claim of “fraudulent misrepresentation” for the injured buyer, who may also have other legal claims as well, such as breach of fiduciary duty, against the real estate professional.

Why intentionally misrepresent details to a buyer?  Usually, the answer is money: manipulating the facts may be an easy, tempting way to close a deal and guarantee a desirable, valuable commission.
Cost chicanery

Claims for Fraudulent Misrepresentation Against Seller and Real Estate Agent

Making a claim for fraudulent misconduct (and breach of fiduciary duty) because of an agent’s misrepresentations can be made against the real estate agent and their brokerage. A claim of fraudulent misrepresentation can also be made against the seller, if the seller was also involved in the fraud.

The keys here are to understand who signed contracts with the buyer, and the seller’s involvement.

Suing the Seller

When a Florida residential real estate buyer signs a contract to purchase a home or condo from a seller, the buyer will be bound by that purchase agreement unless that seller was culpable in the material misrepresentations that were made to the buyer to get him to buy the place by the buyer’s real estate agent. If the seller didn’t know about the fraudulent statements made by the buyer’s agent, then the seller is not going to be held responsible.  Roberts v. Rivera, 458 So. 2d 786 (Fla. Dist. Ct. App. 1984),

Suing the Real Estate Agent

In cases of fraudulent misrepresentation, either or both of the affected seller and buyer may be able to sue the real estate agent.  For example, where a Florida real estate agent advised a seller to sell property to a buyer who happened to be one of the agent’s associate real estate agents for $150,000, and the property was really worth twice that ($300,000), then there could be a claim to be pursued against the agent for both fraudulent misrepresentation and breach of fiduciary duty by that seller. Ordziejeski v. Freudenberg, 946 So. 2d 599, 601 (Fla. Dist. Ct. App. 2006).

 

The Case of the Florida Muckland and the Fake Engineering Report

In the case of Roberts v. Rivera, 458 So. 2d 786 (Fla. Dist. Ct. App. 1984), Mr. Rivera and his wife wanted to buy some real estate near Orlando for investment reasons, land that was near Walt Disney World. They called the real estate broker’s number displayed on the For Sale sign there on the land, Orange Realty Masters, Inc. Sandra McDonald answered their phone call, identified herself as an expert in finding property, and connected them with Ulay Thompson, a real estate broker. Mr. Rivera explained to McDonald and Thompson that he wanted to buy land to develop into residential homes.

They agreed to work with Mr. Rivera to find suitable property, work on any needed rezoning, and help him sell the lots. They would each get a commission as the lots were resold by Rivera. Rivera was then shown a 22-acre tract owned by Mr. and Mrs. Roberts, which was listed with “residential estates” as its best use.

Mr. Rivera inspected the property three times as a buyer before signing a purchase agreement; he walked through with McDonald initially, and she told him that the lake level was low because of drought, at normal times the nearby Lake Mabel would be higher. A developer and friend of Thompson’s testified that he told Rivera as well that the land had low areas not readily seen, absent drought conditions, and could not be developed because of it.

The Fraudulent Misrepresentation

The buyer asked the two real estate professionals, McDonald and Thompson, to investigate this issue — would low elevation prevent him from utilizing the land fully as it was intended? He understood they would get an engineering report to answer his questions; before he signed, the two professionals told the buyer that an engineer had okay-ed the land as suitable for residential development.

Rivera then bought the land from William Roberts. Buyer Rivera later testified seller Roberts said there were “no problems” with the property, but he had rarely visited the property and didn’t know about soil conditions. After closing, an engineer did soil boring tests and found the property would be extremely difficult to develop for residential homes. Moreover, the county planning department testified that it would hard for the property to meet county standards because so much of the track was “low muckland” and estimated the value of the tract at $47,400.00. The Riveras had paid $98,000.00 for the property.

The reviewing court found that there was no controversy that the Riveras had been harmed: they got much less in real estate than they paid for. However, they offered no evidence that the sellers themselves made any oral or written misrepresentations about the soil conditions, or that the sellers hid known facts about the muckland from the buyers. Here, the evidence was clear that the false statements and material misrepresentations made to the buyers were made by the two real estate professionals. This included their false statements about an engineering report that found the property acceptable before the land was purchased by the buyer.

A good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

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Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

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