Duty of Agent to Research a Home’s Square Footage

Case Study:

This week we continue with a series of emails that will continue over the next several weeks where we will analyze Louisiana Court cases dealing with the duties of real estate agents and how agents breached their duties in some of those cases.

Hopefully, the readers of this email will learn more about what duties are placed on Louisiana real estate agents and how not to breach those duties.

This week, we will discuss below a Louisiana 1st Circuit Court of Appeals case dealing with incorrect listing of square footage in a home.

Tres’ Chic in a Week, LLC, vs. The Home Realty Store, et al., 993 So.2d 228 (La. App. 1 Cir. 7/17/08)

Tres’ Chic in a Week, L.L.C. (Buyer) bought, remodeled and resold houses. Tres Chic’s agent showed them an MLS listing for a home indicating the home had 2,132 square feet of living area. Tres’ Chic purchased the home for $148,000 on September 1, 2004 (i.e. $69.42/sq ft.).  After remodeling, Tres’ Chic intended to sell the home for approximately $85 per square foot or $181,220.

After the renovations were complete and while Tres’ Chic was showing the home, the buyer’s agent learned that a previous MLS listing in 1999 by Tres’ Chic’s real estate broker indicated the home had 1,846 square feet of living area (not 2,132 sq ft).  Several measurements were conducted and the home’s actual square footage was determined to be 1,861, resulting in a purchase cost to Tres’ Chic of $79.52 per square foot.

Tres’ Chic sold the home for $155,000.  Subsequently, Tres’ Chic filed suit against their real estate agent seeking damages for lost profits. Tres’ Chic alleged their real estate agent had knowledge that the actual square footage was 1,861, as opposed to 2,132, based on a prior MSL listing of the home and failure to disclose this was negligent misrepresentation.

The Court of Appeal found no evidence that buyer’s agent knew the home only had 1,861 square feet of living area as opposed to 2,132.  Therefore, the Court of Appeals concluded that buyers failed to show their agent knowingly made any false representations concerning the square footage of living area of this home as contemplated by LSA-R.S. 37:1455(A)(15).

The Court of Appeals commented that buyers might have been able to successfully recover on the theory of negligent misrepresentation, but buyers failed to offer any evidence to establish whether the customs and practices of real estate brokers in general required that the buyer’s agent research the MLS history for the property in question.  According to the Court, if the customs and practices of real estate brokers in general impose such a duty, it was clearly breached by the buyer’s agent in this case, and the buyer’s agent might be liable to Tres’ Chic under LSA-C.C. art. 2315 for negligent misrepresentation.

One final theory of recovery attempted by buyers against their real estate agent was justifiable reliance.  Buyers alleged they justifiably relied upon the representations of their agent that the MLS listing contained accurate information.

The Court found the MLS listing indicated the information was deemed reliable but was not guaranteed, that the purchase agreement executed by Tres’ Chic stated that the square footage was not warranted or assured to be accurate, and buyer was given an opportunity during the inspection period to verify the square footage but failed to do so.  For these reasons, the Court of Appeals held the buyer did not justifiably rely on inaccurate information provided by the real estate agent.

Several quick thoughts about this case:

  1. Probably a good idea for agents to do a search of prior MLS listings to determine if there are discrepancies in square footage measurements;
  2. Document in your files the time period searched;
  3. If an agent discovers any discrepancies in prior MLS listings, provide all information to the client and recommend they have the property surveyed and/or appraised to determine an accurate square footage measurement.

 

For any questions concerning this email, please do not hesitate to contact me at rye@tutentitle.com.

H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.

The information contained herein is simply for informational purposes only and not intended to provide legal advice or create an attorney-client relationship.