Q: We closed escrow on one of our listings two months ago. The Buyer has retained an attorney who sent a letter to me and the Seller claiming that the Buyer was defrauded! The Seller wanted the Property advertised as having “high speed” internet access so that information was included in the MLS and my flyer. The Buyer is now claiming that the internet access is inadequate for the Buyer’s needs; he claims that it is not really “high speed” internet at all. He also claims that the phone reception is terrible and, according to the neighbors, most communication services are unreliable in the area. I do not even know what constitutes “high speed” internet; I just advertised the Property the way my client wanted but now the Seller is claiming that it was my idea to use that terminology. The Seller also claims that he orally told me he had problems uploading data and streaming movies.
I don’t understand why the Seller has turned on me. I think it is unfair for the Buyer to make a claim about something that neither he nor his Agent ever asked about. Do I face any liability for the Buyer’s claim?
A: YES, you do face potential liability in this situation. Real estate Brokers and their Agents are legally responsible for any false information they enter into the MLS; you may be liable for false advertising if there is no “high speed” internet. Unless you have any documentation (such as an email) to prove that it was the Seller who chose the language that you used, it will be difficult to shift the responsibility for the content of your advertisements to the Seller and, if the Seller is believed, you may face liability for breach of your fiduciary duties to the Seller.
The availability and quality of communication services (phone, television and internet) have become important issues for many Buyers especially as the number of internet users per household increases; this is magnified as the types of uses (e.g., email, gaming, streaming) have increased. With more people working from home and more people preferring to enjoy a wide array of entertainment streaming devices at home, the ability to access and fully use various types of communication services and devices are often material facts for Buyers that do not get investigated.
All too frequently, Sellers pressure Listing Agents to advertise features about the Property so as to make it more likely to attract Buyers; however, simply because your Seller wants features advertised does not mean that you, as the Seller’s Agent, should accept a Seller’s representations as being correct and Sellers are often not truthful. Agents need to make sure that everything that they advertise about a property is completely accurate.
There has been a definite increase in the number of claims brought by Buyers regarding the availability, cost and quality of communication services and devices. Most of these cases center on the failure of Sellers to disclose known information about the problems that they have had with these services; the Sellers’ agents are often brought into the claim because of how the property was advertised and/or that they knew of the problems and did not make sure the information was disclosed. Buyers’ agents are usually targeted in these cases for failing to recommend that their clients personally investigate whether or not they can have the type of services that they want, either with the Buyers’ current or preferred carrier(s) or with the Sellers’ existing providers.
The cost, availability, type and reliability of phone, television and internet service is not a topic included in the TDS. Although Sellers must truthfully disclose what they know about all material facts, neither of the CAR disclosure forms (the SPQ and the ESD) contain any questions about communication services and devices; thus, most Sellers are not being prompted to disclose their knowledge about these issues. On the other hand, the PRDS Supplemental Seller’s Checklist (“SSC”) does have a section which asks Sellers about communication services and whether Sellers have experienced any ongoing or recurring issues, conditions and/or problems.
This week’s Practice Tip focuses on our recommendations for the best practices that should be used to avoid claims about communication services and devices and to better protect the interests of Sellers and Buyers.
PRACTICE TIPS:
ALL AGENTS:
If, for any reason, you are describing the availability, cost, type, quality and/or speed of any communication service, choose your words carefully and do not use terminology that you do not personally understand. Make certain that you preface that description by attributing where you got that information (e.g., “the Seller has stated”) and that you make it clear that you have not investigated or verified that information.
SELLERS’ AGENTS:
- Regardless of what the Seller wants included in any advertisements, avoid making any representations regarding the type, quality and/or speed of phone, television or internet service. Warn Sellers that it is dangerous to “oversell” the availability and/or quality of any aspect of the Property.
- If you are using the CAR SPQ or the ESD forms, recommend, in writing, that the Seller disclose any known complaints or problems that the Seller has experienced or knows about the Property including any issues with the phone, television and internet services in the “Other” material facts section or on an “additional comments” page.
- In all of your advertising and marketing materials regarding a listing, use the following disclaimer language:
“Broker and Agents have not and will not investigate or verify information provided by third parties. Buyer is advised to conduct all desired investigations, and any other matters concerning the Property, with qualified professionals.”
BUYERS’ AGENTS:
- Find out what the Buyer’s actual wants and needs are with respect to their intended use of the Property, including, but not limited to, internet access and other communication services. The best practice is to confirm that information in an email to your client and confirm that you will not be investigating the information. Make sure that you specify that it is the Buyer who will investigate these issues, preferably before making an offer or during the Buyer’s investigation contingency period.
- Suggest that your client write out all of the questions that the Buyer may have about communication services (such as whether the Seller has ever tested the speed of their internet service or any other issues) so that those questions can be sent to the Seller with a request that the Seller respond in writing. This will really be helpful if the Seller completed the CAR SPQ or ESD forms since those issues are not included. Warn your client, in an email, that the Buyer should not assume that the Seller’s information is accurate and/or that what worked for the Seller will necessarily meet the Buyer’s needs.
- If the Buyer wants a particular type of communication service, recommend that the Buyer contact the service providers directly to determine the availability of access and the cost of that service. The Buyer should conduct this investigation before making their offer or during the Buyer’s investigation contingency period.
- If communication services are an important factor in the Buyer’s decision to purchase but the Buyer is willing to remove most of the contract contingencies, consider including a new, stand-alone contingency for the Buyer to investigate the availability, quality and/or cost of communications services.
ATTORNEY-CLIENT PRIVILEGED COMMUNICATION: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
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