Suing a Real Estate Agent for Misrepresentation in California

A real estate agent represents parties in real estate transactions, usually the sale and purchase of real property. A real estate agent is the fiduciary of their client. So, they owe their clients a fiduciary duty, i.e., they are legally obligated to represent their client’s best interest. They should put their client’s interest above their own.

They owe a duty to represent the truth about real estate that is the subject of a transaction to their client. They also owe a duty of care to exercise reasonable diligence in their representation. If they fail to act as California law requires them to do, they may find themselves named as a defendant in a lawsuit. A legal consultation with a California lawyer would help a person understand more about the duties of a real estate agent.

Some of the allegations that are common in lawsuits against real estate agents are as follows:

• Breach of Fiduciary Duty: As noted above, real estate agents owe a fiduciary duty to their clients and must act in their client’s best interest. If they do not and their client suffers economic loss, the realtor may be liable for breach of fiduciary duty. For example, an agent may represent both the buyer and the seller in a transaction. But they must tell both parties if they do. If they fail to tell them and then serves the interest of one and not the other, the party whose interests were not served may have grounds for a lawsuit.
• Misrepresentation: If a realtor knowingly gives their client false information or fails to communicate important facts about a property or a transaction, they may be liable for fraudulent misrepresentation: An example would be a real estate agent telling a buyer that the home they like is in top condition, when, in fact, it needs significant renovations. If the buyer goes forward with a purchase, they would confront unexpected expenses after the purchase. A realtor could be liable for the buyer’s losses.
• Negligence: Negligence might involve failing to perform due diligence, such as failing to have a professional inspect a property on a buyer’s behalf. Or it might consist of failing to discover significant legal conditions such as covenants that apply to a property. Such failures could lead to liability for negligence.
  • For example, a realtor might not learn about pending zoning changes that would limit the uses an owner can make of a property. The buyer might complete the purchase and later find out they cannot use the property as they had planned and suffer a consequent financial loss. The realtor could be liable to compensate the buyer for the loss.
• Fraud: Fraud consists of Intentionally deceiving clients for personal gain, such as colluding with sellers to manipulate property prices or covering up defects in a property. A real estate agent can collude with appraisers and inspectors to inflate the price and hide defects.
• Breach of contract: Every transaction involves real estate contracts. One of those contracts would be the contract between a realtor and their client. If the realtor fails to perform their contractual duties as promised, they may be liable for breach of contract.
• Discrimination: The federal Fair Housing Act and California civil rights law ban discrimination in housing in California. A real estate agent who offers certain opportunities to some clients and not to others can be charged with discrimination.

What Are Real Estate Agents Not Authorized To Do in California?

As noted above, a real estate agent is a licensed professional who assumes a fiduciary relationship with their clients. They have a duty to perform to the highest ethical standards. What they must not do if they fall short of the high standards that apply to their role.

What Are Misrepresentations and Failures To Disclose?

Fraud, or “misrepresentation” as it is sometimes called, as defined by California law is conduct such as the following, when committed by a party to a contract with intent to deceive another party to the contract. Or a fraud may be perpetrated in order to induce a person to enter into a contract.

• The representation as fact of something that is not true made by a person who knows it is not true,
• The positive assertion of something that is not true even though the person making the assertion believes it to be true,
• The failure to disclose something of significance that is true by a person who has knowledge of truth of the fact and its significance,
• Making a promise to do something without having any intention of doing it,
• Any other act that is intended to deceive another person.

What Are Specific Examples of Real Estate Agent Misrepresentation in California?

Most commonly, misrepresentations and failures to disclose involve defects and problems with a property about which the seller does not want the buyer to know. Generally, the seller does not want to have to make some expensive repair before selling or thinks that disclosure would negatively affect the sales price. Some examples are as follows:

• Failing to disclose that the square footage of the home being sold is not the same as what is stated on the listing
• Failing to disclose that there is a water leak in an interior wall which could lead to mold problems
• Failure to disclose that there is an existing mold issue on the property
• Failure to reveal cracks in a home’s foundation that have been hidden or patched but not fully and correctly repaired.

Additionally, selling a property ostensibly “as is,” which suggests that it may have problems but the seller disclaims all responsibility for them, does not relieve the seller of potential liability for failing to disclose known problems or defects even if they would seem to be apparent to the buyer. It also would not relieve a seller of potential liability for fraud, misrepresentation or negligence.

What Are the Most Common Lawsuits Against Real Estate Agents?

California law imposes a special duty on the seller of residential real estate or their broker to deliver a real estate transfer disclosure statement to the buyer. This statement presents a checklist that gives notice of all known problems, defects and potential problems that exist on the property. The statement must be completed in good faith and it must be honest.

Of course, in California, a seller still has their common law duty of disclosure and their duty to avoid fraud, misrepresentation and negligence. Suing a real estate agent for misrepresentation might be challenging. In cases in which the misrepresentation was In addition to the lawsuits listed above, you may also be able to sue a real estate agent for lying.

However, suing a realtor for misrepresentation may prove to be challenging. The nature of the falsity or fact that is not disclosed would affect the possibility of success. If the lie involves something relatively minor, such as that roof gutters needed replacement, it might not have affected the sales price to a significant degree.

The misrepresentation or failure to disclose would have to involve something so significant as to have a significant impact on the price that the buyer paid. Otherwise, a lawsuit might not justify the time and expense of a lawsuit.

How Do I Sue a Real Estate Agent for Misrepresentation in California?

An individual who has been the victim of a real estate agent’s misconduct should consult with a California real estate lawyer. They want to confirm the facts of their case and that their situation gives them grounds for a civil lawsuit. The individual would want to hear from their lawyer what type of damages they would be entitled to recover and how much.

The next step would be to identify the California court in which the lawsuit would be filed and whether any party in addition to the real estate agent would be named as a defendant. The lawsuit then must be served on all parties who have been sued.

An individual would also ask their lawyer to identify any statutes of limitations that might apply. The time limit for suing a real estate agent, known as the “statute of limitations,” depends on the specific legal claims involved. For example, in California, the following time limits apply:

• Breach of Contract: A person has 4 years from the date of the breach for a written contract, 2 years if it was oral.
• Fraud: The limit is 3 years from the date when the victim discovers the fraud.
• Negligence: The limit is 2 years from the date of the incident that caused the victim’s harm.

A person would want to consult with a real estate lawyer about their particular situation to identify the legal deadlines that would apply.

What Remedies Are Available if You Sue a Real Estate Agent?

The kind of damages that a person could recover In a lawsuit against a realtor would be the following:

• Compensatory Damages: This is an amount of money that compensates the victim for the actual economic losses they suffered as a direct result of the realtor’s actions, such as financial losses from a property purchased based on misrepresentation.
• Rescission: Failing to make the disclosures required by California law could entitle a buyer to two remedies, i.e., rescission and money damages. Rescission would involve undoing the real estate transaction – the buyer would get their property back and the seller would get back the funds they paid to purchase it.
• Punitive Damages: Punitive damages are awarded rarely in cases in which the real estate agent did something especially egregious, blame-worthy. The goal of punitive damages, as the term suggests, is to punish the defendant and not to compensate the victim for some provable harm.
• Consequential Damages: Consequential damages are awarded for additional losses that may be indirectly related to the realtor’s actions. An example would be lost opportunity costs.
• Attorney’s Fees and Costs: If the law that applies to a case provides for it, a victim may be able to recover their legal fees and other costs. Or the parties to a contract may include a provision that allows a party who wins a suit for breach of contract to recover attorney’s fees.

A person would want to discuss their specific situation with a real estate attorney to determine what types of damages might be available in their case.

Do I Need an Attorney To Sue a Real Estate Agent in California?

If you believe you have not been represented competently or ethically by a real estate agent, you want to talk to a California real estate lawyer. LegalMatch.com can connect you to a lawyer who understands the duties of a realtor and can help you determine if you have suffered economic losses because of a realtor’s failures.

If you are a realtor and have questions about your obligations to a client, you, too, could benefit from a legal consultation with a California real estate lawyer.