A spotlight on a claim against a real estate agent who represented his sister in the sale of the sister’s house where the buyer claimed the sister and the agent conspired to not disclose flooding events.
An agent represented his sister as the seller of a residential real estate property. The sister filled out a residential real property disclosure form that was required in the jurisdiction. The purpose of the form was to provide prospective buyers with information about material defects in the property. The agent did not help the sister fill out the form other than to say “answer all of the questions on the form and disclose all material defects that you are aware of.” The sister answered “yes” that she was aware of flooding problems in the basement and specifically disclosed that there had been “one flooding event in the basement two years ago
Litigation & Result:
The sister testified that she was only aware of one flooding event. The agent testified that he was not aware of any flooding events and relied upon his sister to fill out the form correctly. The agent filed a motion for summary judgment on the issue that there is no proof that the agent had any knowledge of the additional flooding events. The judge denied the motion for summary judgment on the basis that there were facts in dispute on whether there might have been additional flooding events and that it is possible to impute knowledge to the agent due to the brother/sister relationship. Worried about a jury finding that a brother and sister may have conspired based upon their family relationship, the agent went to mediation and settled the matter. The agent agreed to pay $40,000. The sister agreed to pay $5,000 as she had no insurance coverage and very few assets. The real estate agent also incurred $45,000 in attorney’s fees for his defense.
Best Risk Management Practices to Prevent Claim:
Agents need to be extremely careful representing family members in that knowledge can be imputed to the agent. It is best to refer the matter to another agent to take the lead on the transaction.