Last Update: 02/24/16
Misrepresentation Of a Home’s Value
For most of us, the most essential term in any Florida real estate transaction is the contract price: the amount the seller and the buyer agree on for purchasing the home, condo, or townhouse.
Each side assumes that he (or she) has accurate information on what the property is worth when they enter into the Contract; both parties believe they have an understanding of the property’s market value.
To that end, most Buyers and sellers of residential real estate seek a real estate agent’s opinion as to a home’s value (some may even consult with an appraiser).
Prices move up or down depending upon a variety factors, like the overall housing market, the condition of the home, the amount of land involved, if there are any easements or obstructions connected with the land, environmental concerns, property taxes, comparables, and more – all of these issues can act to influence property values. Calculating the value of any piece of real estate involves examining concrete data; data that can be relied upon.
Learning About the Misrepresentation of Property Value
In the past few years, parties involved in Florida real estate transactions have learned that their reliance upon an opinion of value was misplaced and, as a result, someone was financially harmed.
There are all sorts of ways that the value of the real estate can be misrepresented, including:
- A seller discovers that the market listing of the home was too low and frets that the real estate agent intentionally low-balled the listing to make a quick sale.
- A buyer finds that the appraiser overvalued the condo and the buyer has paid over the true market value of the home.
- A buyer believes that the real estate agent fiddled with listing comparables in order to induce the buyer to offer a higher amount than is justified.
- After moving in, a buyer learns the home has less square footage than what was represented to them by the Seller and/or real estate agent.
Remedies for Misrepresentation of Property Value
When someone is harmed because the value of property is misrepresented to them, the only real remedies are to file a lawsuit to either rescind the transaction or to seek recovery of damages. That damage claim (or the “cause of action”) is usually brought against more than one person (the ”defendants”) all of whom may be responsible for paying damages to the wronged party (the “plaintiff”).
In other words, the plaintiff files a lawsuit where he/she doesn’t just sue the seller, but also sues the real estate broker, the real estate agent, and possibly the appraiser for misrepresentation of the property value. Consider these 3 possibilities:
1. You Can Sue The Seller of Your Home If You are A Buyer Who Discovers Misrepresentation of Property Value
Buyers that pay too much at closing for a home, condo, or other piece of Florida real estate may have grounds to sue the seller for damages because the seller in a residential real estate transaction has certain duties (including disclosure) to the buyer under the Contract. Additionally, if a Seller acts intentionally to mislead a buyer, then the seller may be liable for fraud (either by failing to disclose material information or by providing false information to the buyer).
2. You Can Sue the Appraiser If There Has Been Appraisal Fraud
Appraisers must follow stringent standards here in Florida when they appraise residential property. If the buyer discovers that the appraisal is inaccurate or fraudulent, then the buyer can sue the appraiser for damages under Florida law. For more information here, see our posts on Appraisal Fraud.
3. You Can Sue the Real Estate Agent and the Real Estate Broker
If a buyer or seller relies upon facts presented to them by a real estate agent (or they relied upon the material omission of information, where the agent should have disclosed something but didn’t) then an injured party can sue the real estate agent as well as the brokerage employing them for damages. The kinds of damages that an injured party can recover will depend upon the kind of contractual agreement the injured party had with the real estate agent, if any. For details, see our series of posts on Realtors.
Criminal Misrepresentations Lead to Florida’s Mortgage Fraud Problems
During the boom, there was a lot of temptation to fudge the value of property in order to get homes and condos sold. Sellers were tempted, real estate agents and mortgage brokers were tempted, too. As the market exploded, these temptations grew stronger. Everybody wanted to profit from the housing boom.
In fact, the temptation to misrepresent property values was the basis for the mortgage fraud that Florida experienced during this period of time.
As an example, a FBI Mortgage Fraud investigation here in Florida made the national news as federal prosecutors tried a mortgage fraud case where 70 Florida luxury waterfront properties were misrepresented to have higher real estate values and correspondingly fake sales prices so “straw buyers” could get home loans on the properties at the maximum amount possible (once the wrongdoers had the loan proceeds, they skipped on the notes and split up the money).
Has There Been a Misrepresentation of Your Property Value?
If you believe that you have been the victim of a misrepresentation related to the value of property, you should gather as much information as you can and then seek legal advice. An experienced real estate lawyer should be able to advise you of the extent of your damages, identify all of the potential defendants in your case, and advise whether or not punitive (exemplary) damages are available to you.
A good piece of advice when you and your family are purchasing or selling your family home in one of the biggest transactions of your life is to at least talk with a Florida real estate lawyer. Getting someone to review all of the paperwork isn’t as costly as most of us think it is. And, it’s always a lot cheaper than paying to fix a problem after a closing occurs. 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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