From the Eyes of an Expert Witness
Originally appeared in Bay Area News Group publications on March 13, 2009
As a Northern California real estate expert witness, by the time I get involved with a case, many people are upset and it has already cost big bucks for both the plaintiff and defendant. My opinion and testimony commonly involves the agents’ standard of care and adequate disclosure, along with other issues. Over the years, I have noted specific problems that come up repeatedly.
An Agent’s Duties
First and foremost, an agent owes his client, buyer or seller, the fiduciary duty of “utmost care, integrity, honesty and loyalty.” In addition, the National Association of Realtors Code of Ethics pledges all Realtors to “protect and promote the interests of their client.” It goes on to say: “This obligation is primary.” Unfortunately, there are instances where commission and “making the sale” takes precedence over California Civil Code duties and the Code of Ethics.
Poor record keeping
When mediation has failed and a case is heading to court or arbitration, the parties involved generally have their sworn deposition taken prior to final adjudication. Regarding agents, common sense would dictate they keep notes once signs of a potential conflict surface. Who can remember what happened two weeks, no less two years, ago?
Despite risk management classes that implore agents to keep a “contemporaneous written record” of each and every transaction, especially when a legal dispute has clearly erupted, licensees on either side rarely document events in writing. At best, some agents appear to have created notes and backdated them. This includes salespeople who routinely sell multi-million dollar properties.
The broker’s office file is often inadequate and poorly organized. Rather than complete reports, there is solely the first page of various documents. The file contains faxes with no cover sheets or no faxes at all. Copies of all emails sent and received are nowhere to be found. Even in cases where an agent has done nothing wrong and is involved due to his broker’s “deep pockets” with Errors & Omissions Insurance, sloppiness in this area can be costly.
Lack of disclosure
California law requires sellers and agents to fully disclose anything that is, or might be, a “material fact,” i.e., something so important it could influence the buyer’s decision to buy or not and/or how much to pay. A common mistake is the listing agent’s failure to properly instruct the seller in terms of how to include all material facts on disclosure forms.
Another, related problem is inconsistencies in information the seller has provided on various disclosures. This particularly may come up when a home was previously on the market, withdrawn and re-listed. Many licensees do not carefully review and compare sellers’ disclosures to ensure they match and are accurate.
Condition is key
Of all the important factors to consider when buying a house, condition is at or near the top of the list. Few buyers are attuned to this fact. Many gloss over this variable.
During our superheated seller’s market, buyers competed for homes in multiple offer wars. A number of those purchasers waived comprehensive home inspections as an incentive for the seller to accept their offer. Some are now realizing what they could have and should have known before buying – their house has foundation, drainage and structural concerns that will be expensive to repair.
Depending on what documented advice the agents on each side gave to their clients, we will see a slew of these types of cases. In some, the key issue will be lack of disclosure; others will involve the selling (buyer’s) agent’s failure to explain to the buyer the risk he was taking by not hiring his own professional inspectors.
Flyers, Ads, MLS Advertising
Salespeople, many times, use hyperbole to market their listings. For example, words like “picture perfect,” or “flawless” on a flyer, newspaper ad or on the Multiple Listing Service (MLS) can set up an agent for tremendous future liability. Expressions like “exceptional quality” or “in-law unit” could end up haunting the agent.
Seeds for lawsuits are sown every day by the misrepresentation of the number of bedrooms. This is related not only to the potential value of a home, but, more importantly, to health and safety. Bedrooms are used for sleeping and, for this reason, must fit certain criteria to qualify as such.
For instance, a room with a door leading in and out from the garage, even though it looks like a bedroom, cannot be used for sleeping. Toxic gases could kill the occupant. I have testified in Superior Court on this very subject.
Neighborhood specialist
Marketing oneself as a specialist in the area might bring business, but if things on a sale go wrong, it could make the agent a sitting duck. When clients hire an attorney to represent them in a real estate dispute, the attorney looks for anything and everything to make the case. There have been numerous occasions where I, as the real estate expert witness, have pointed out to the attorney who hired me that an agent was calling herself a specialist. The agent’s problem becomes that, as a specialist, she should have known or done something she did not do.
Final Thoughts
As an expert witness, I only take cases where I do not know the parties and, after review, I believe in what I will testify. When there are licensees involved, I consistently find one crucial mistake – the agent has not operated in the client’s best interests. For your protection, always choose an agent who is highly competent and will put loyalty to you above all. Regardless of who wins, all sides pay a price in real estate disputes.
Related Articles:
Understanding Agency
What is a Bedroom?