Simply put, a real estate agent is a certified expert who is licensed to perform real estate business in a given state. They represent buyers or sellers of real estate, which is essentially property consisting of land and buildings. Real estate agents have received an education and training in all matters related to real estates, such as the regulations governing property sales. They have passed a state board exam to get the proper license.
Real estate agents are liable for several tasks, depending on their education, licensing, and credentials.
Some examples of what a real estate agent does include:
- Handling standard client forms;
- Drafting and preparing offers and other related paperwork;
- Providing adequate customer service if a client has an issue;
- Answering essential questions that clients may have, such as describing the home purchasing/selling process;
- Reviewing real estate contracts, such as lease agreements, purchase agreements, and rental contracts;
- Negotiating sale prices between sellers and clients;
- Closing any deals;
- Showcasing properties to potential buyers; and
- Guiding clients through tours of the property.
This is not a complete list of what real estate agents do. The term “real estate agent” is sometimes used interchangeably with salespeople and brokers. However, brokers may work alone because of the more rigorous state board licensing process required to complete. Generally, real estate agents must work with a broker.
What Are Real Estate Agents Not Authorized to Do?
Although real estate agents do have numerous responsibilities and things they handle, there are some things real estate agents are not allowed to do. Some examples include:
- Giving legal advice (unless they are a licensed attorney and are acting in a capacity as your attorney), as this would be considered an authorized practice of law;
- Giving tax advice, as they are not licensed to do so; and
- Violating the Fair Housing Act, such as disclosing certain details about a neighborhood or community that the Act protects.
What Are Misrepresentations and Failures to Disclose?
Legally, a misrepresentation is when a real estate broker misstates some material feature of the property. Frequently lumped in with misrepresentations are failures to disclose, which occur when a broker fails to address or disclose a material feature of the property altogether.
Misrepresentations often involve the property’s foundation or crucial structural features, property boundaries, or termite or pest troubles. The most common undisclosed problems involve easements on the property, title issues, and environmental concerns.
We normally think of brokers as the experts and aren’t often able to question or correct what they tell us. Sadly, it isn’t until much later, after a home is bought or withers too long on the market, that we find out we’ve been deceived.
What Are Specific Examples of Real Estate Agent Misrepresentation?
To better understand real estate agent misrepresentation, it may be helpful to examine some specific examples. One example is when a rental property is marketed as new although it was occupied for years.
Another example is selling a property that has an undiscovered defect, such as a leaking roof. Misrepresenting the square footage of a property is also an example that can affect the market value of the home or property.
What Are the Most Common Lawsuits Against Real Estate Agents?
Real estate agents may be subject to multiple legal claims, given the nature of their work. The most common legal claim emerges when the agent is negligent in their fiduciary duties. A fiduciary is an individual entrusted with acting on behalf of another person and making decisions in their best interest.
Fiduciaries are entrusted with legal duties or obligations to their clients because of their knowledge and specialized training. A real estate agent’s most important fiduciary duty requirement is being honest and making decisions based on their client’s best interest.
The agent will be spending most of the property buying process working independently of the client, whether negotiating with other parties, coordinating inspections, or reviewing contract documents. They are required to act as a representative for their client by making decisions and reporting information openly and honestly.
Some typical breaches of fiduciary duty include:
- Obtaining secret profits or fees that are not revealed to the client(s);
- Failing to notify a seller of other offers on the table after an offer has been accepted; or
- Declining or accepting an offer without the client’s consent.
Some other standard lawsuits filed against real estate agents include:
- Failing to disclose a property defect: The seller or buyer is ultimately answerable for disclosing any property defects involved in a real estate sale. However, agents must disclose anything that materially affects the property, which means they must reveal facts when the value or desirability of the property is negatively impacted.
- These defects can include construction issues, improvements without permits, covenants, leaks, cracks, termites, noise, or nuisances. Even if the agent did not know about the defect, they might still be sued if they represent a party knowing it.
- Negligence: Agents may also be sued for negligence if they fail to exercise due care towards others. Due care is basically what a reasonable or prudent person would do under the same circumstances.
- In this case, it would be what a fellow real estate agent would have done. A client may assert that their real estate agent knew or should have known something but failed to take any action to stop or handle it.
- Failing to keep a person’s personal data safe: Agents have access to lots of personal information, especially from their clients. Should they fail to keep that data secure, such as defending it from hackers by installing security software, they may find themselves subject to a legal claim for any damages resulting from the mishandling of a client’s data.
In addition to the lawsuits listed above, you may also be able to sue a real estate agent for lying. However, suing for a lie or misrepresentation is not as easy as it sounds. The nature of the lie will significantly impact the legality of such a suit. If the lie was overt, such as the agent asserting that the house had never been remodeled when it was, you could have a case.
However, if the lie was something that the buyer should have been aware of, there may not be a case. An instance that the buyer should be mindful of would be if the agent asserted that the house was one block from a school, but there are no schools within one block of that property.
How to Sue a Real Estate Agent for Misrepresentation?
Real estate agents can be sued for misrepresentation. There are also steps an individual can take prior to filing their lawsuit to try and resolve the issue, if they desire to do so. These steps include:
Sending a demand letter
An individual can send the real estate agent a demand letter that outlines the issue or problem, what steps the individual would like to take to resolve the issue, and the deadline for that action. A demand letter may also include:
- How much money an individual is owed
- Why they are owed that money
- Where to send the payment
- A deadline for a response from the real estate agent
Demand letters can be effective ways to notify a real estate agent that the individual is serious about filing a complaint and is willing to escalate the issue until it is resolved.
Filing a complaint against the real estate agent with the appropriate state agency
Most states have licensing agencies or real estate commissions where they can file a complaint against real estate agents. Once they have filed a complaint, the agency will investigate the allegations.
Filing a complaint against the real estate agent with the National Association of Realtors
The terms real estate agent and realtor have different meanings and legal ramifications. A real estate agent is a licensed real estate professional who helps buyers and sellers market and purchase properties as well as handle other issues.
Realtor, on the other hand, is a term that is trademarked by the National Association of Realtors. This means that only real estate agents who are registered with the association can call themselves Realtors.
Realtors are required to engage in regular training and continuing education and are subject to a code of ethics from the Association. If a Realtor has violated this code, an individual can file an ethics complaint through the association of Realtors where that Realtor is a member.
Suing the real estate agent in small claims court
Every state has different rules for small claims courts. If an individual has a dispute involving a smaller amount of damages, typically between $2,500 and $25,000, they may be able to resolve it in small claims court.
Although an individual is not required to have legal representation in small claims court, it is always important to consult with a lawyer to determine the best way to present a case. Important evidence that an individual may need to present includes:
- The sale contract
- Any other signed agreements
- Communication with the real estate agent or office
- Photographs of property issues or defects
- Pictures of the property itself
- Information from witnesses
Filing a lawsuit in civil court
If an individual is not able to resolve their issue using any of the processes outlined above, they may be able to file a lawsuit in their local civil court. An individual should consult with a local attorney who can advise them of the laws in their state and the possible outcomes of their claim.
A lawyer will draft a complaint which outlines the issues in the case and file it in the proper court. The summons and complaint will be served on the defendant real estate agent.
Once the lawsuit is filed, the case may be settled at any time outside of the courtroom. It is essential to have a lawyer present during any settlement negotiations to ensure that the individual is offered a fair settlement amount.
If the case is not settled, it will proceed to a trial where a jury or judge will make a decision based on the evidence presented in court.
What Remedies Are Available if You Sue a Real Estate Agent?
In most real estate-related lawsuits, a court will award monetary damages to a plaintiff who a real estate agent has wronged. These awards could include:
- Compensatory damages are associated with a breach of contract or misrepresentation. Additionally, punitive damages may be available in cases where there was fraudulent misrepresentation;
- Remedies in equity, such as the agent being instructed to cancel the contract they breached through rescission; or
- Other damages such as emotional distress or any other damages that may have occurred due to the actions of the real estate agent.
When suing a real estate agent, you must gather all documents that evidence any of the damages you may have suffered. Further, it is also essential that you mitigate your damages, meaning that you should not cause yourself additional harm and then try and recover that other harm from the real estate agent.
Do I Need an Attorney to Sue a Real Estate Agent?
If you believe your real estate agent has wronged you, you should immediately consult with a skilled and knowledgeable real estate attorney in your area. An experienced attorney will help you comprehend the specifics of your case, help you decide if you have a proper legal claim, and advise you on how to sue a realtor. Additionally, they will represent you in court, if necessary.
