Monday, May 30, 2016

Seller Liability For Agent Misrepresentations

Buyers of residential real estate in Wisconsin typically receive a Real Estate Condition Report from the previous owners (or sellers) of the property.  In this Real Estate Condition Report, the sellers are required to disclose their awareness of defects or adverse conditions affecting the property.  While the sellers tell buyers everything that is wrong with their home, their real estate agent tells buyers (or their agents) everything that is supposedly good.  The sellers' real estate agent advertises the property on her website; the Multiple Listing Service; other real estate websites such as Realtor, Zillow, and Trulia; and social media.  Could the buyers hold the sellers liable if the real estate agent misrepresents the acreage, the square footage, the number of bedrooms or bathrooms, the age of the roof, the warranty on foundation repairs, the materials used to remodel the kitchen or bathroom, or lake access?

Wis. Stat. s. 452.139(2)(a) attempts to answer this very question:

A client is not liable for a misrepresentation made in connection with the provision of brokerage services by a firm or any licensee associated with the firm, unless the client knows or should have known of the misrepresentation or the firm or licensee is repeating a misrepresentation made by the client.

At first blush, this statute appears to absolve sellers from liability from most real estate agent misrepresentations.  Trouble is, the standard WB-1 Residential Listing Contract includes provisions under which sellers specifically authorize their real estate agent to market the property using certain media and to "do those acts reasonably necessary to effect a sale. . . ."  One could use this language to argue that the sellers should have known of their agent's misrepresentations because they specifically authorized - and even demanded - that their agent advertise their home a certain way.

In order to reduce this risk, I recommend that sellers demand that their listing contract include a provision giving them the right to approve or disapprove the content of all advertising prior to its publication.

Are you considering selling your home?  Please email me at rudolphkuss@stevensandkuss.com for a free initial consultation.