If A Seller’s Broker Could Be Liable To Purchaser For Fraudulent Non-Disclosure In A Residential Sale, Would A Transaction Broker And/Or A Buyer’s Broker Also Be Liable

If A Seller’s Broker Could Be Liable To Purchaser For Fraudulent Non-Disclosure In A Residential Sale, Would A Transaction Broker And/Or A Buyer’s Broker Also Be Liable?

by on October 27th, 2016 in Real Estate Law
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Last modified on June 30th, 2019 at 7:58 pm

Is there a duty to disclose defects in a Florida real estate sale? Who is responsible for failure to disclose defects that materially affect the value of the property?

The opinion of Goodman v. Rose Realty West, Inc., 193 So.3d 86 (Fla. 4th DCA 2016) indicates that a seller’s real estate agent’s knowledge of defects that materially affect the value of the property which were not readily observable and not disclosed to the buyer could make the seller’s broker for whom the agent worked liable to the buyer.

The case has some procedural and other facts that may distinguish it when it is cited as authority, but the law cited in the case and the conclusions reached do not appear to be affected by those facts. The opinion is a reversal of a summary judgment in favor of the seller’s broker who was sued by the buyer because of unspecified issues of fact concerning the broker’s liability. The seller of the house was also the seller’s real estate agent for the transaction. The broker who employed the seller/real estate agent is a named defendant.

The opinion notes that “when the seller replaced his seller’s hat with that of a real estate agent, his knowledge about the conditions of his home remain the same” and also “the duty of disclosure announced in Johnson extends to a seller’s real estate broker.” The opinion also states, “[I]f the seller/agent withheld material information, this was done during his work as a real estate agent to facilitate a sale, which was in interest of the principal/broker, who would earn a commission.” (Emphasis supplied.)

In almost every real estate transaction in which a real estate agent is involved, either a seller’s agent, a buyer’s agent or a transactional agent, the broker(s) are looking to earn a commission and their efforts in the transaction are to facilitate a sale. I have seen a lot of closing statements that include a commission for one or more brokers. If the duty to disclose arises because of the desire to earn a commission, then it would appear that the liability is the same whether there is a seller’s, buyer’s, or transaction broker/agent involved. All brokers/agents have the same desire to earn a commission.

In a strong market where commissions are plentiful, there should be less incentive to not disclose information that could kill a sale. Weak markets do occur and an overabundance of brokers/agents even in a strong market may create incentive to remain silent so as not to kill the deal by disclosing hidden property defects.

If you have any questions or concerns about selling or buying a home or other real estate, or about the duty to disclose hidden defects in a Florida real estate sale, I recommend contacting an experienced real estate attorney. Howard P. Ross, Esq., B.C.S. has over 50 years’ experience representing clients in both residential and commercial real estate transactions.

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