NOTE: The attached Advisory and Disclosure form has been modified to create an opportunity for the Seller to review the data provided by the real estate agent and confirm that the Seller has no other information or documentation regarding the size data specified in the grid by the real estate professional. Please use this revised form and delete all prior versions.
BOTTOM LINE: If square footage and/or lot size numbers are mentioned in any marketing/disclosure materials or in the MLS, then ALWAYS use the attached “Square Footage and Lot Size Advisory and Disclosure.”
Q: I am a listing agent. When I enter the property in the MLS, a square footage number auto-populates the listing. After we ratified a Purchase Agreement, that Buyer received an appraisal with a lower square footage number. Now the Buyer wants a price reduction based upon the size differential multiplied by the estimated cost per square foot provided by that Appraiser. What do we do and how can I prevent this from happening again?
A: Perhaps one of the most frequent cause of complaints arise because of discrepancies in square footage and/or lot size. These are expensive claims and usually the Seller blames the Listing Agent because that is the person who was “responsible” for how the property was advertised.
These types of transactional problems and post-closing of escrow claims also can be avoided, or at least minimized, if Listing Agents follow simple preventative steps
BACKGROUND: A recent California Supreme Court decision held that if a Listing Agent is aware of size discrepancies (e.g., the advertised home size in the MLS is smaller than the County records), then the Listing Agent is obligated to disclose that known discrepancy. That decision also affirmed earlier Appellate Court decisions which have held that, when a real estate agent is passing information on to a Buyer, then that agent must indicate the source of the information, and either verify the information or state that the information has not been verified.
Because there are several ways to measure square footage and lot size, real estate agents should NOT attempt to conduct their own measurement for fear that another source may arrive at a different number.
In those situations where agents feel that they must make a statement of square footage or lot size, or where a square footage number auto-populates the MLS entry, the best practice for agents to reduce the chance of a claim when forwarding those statements on to Buyers is to ATTRIBUTE (state the source of the information), DISCLOSE the information (for example provide a copy of the MLS) and then DISCLAIM (state that the information has not been verified). The final step is to RECOMMEND that the Buyer investigate the information to the Buyer’s satisfaction.
To avoid claims that the Buyer was fraudulently induced to enter into Purchase Agreement by false advertising statements, the safest course of action is to make sure that each Buyer who receives marketing materials and/or MLS print-outs citing square footage or lot size information be notified, in writing prior to the ratification of the Purchase Agreement, of the source of that information and that it has not been verified.
PRACTICE TIPS:
LISTING AGENTS:
1. It is safest not to quote square footage or lot size measurements at all but this is usually unavoidable.
2. Whenever square footage or lot size data are used in any type of marketing materials — including, but not limited to, flyers, magazine advertisements, MLS, and/or social media — the best practice is to ATTRIBUTE, DISCLOSE AND DISCLAIM in a prominent manner in those materials.
For further information, see Weekly Practice Tip “Square Footage.”
3. The best protection for Listing Agents is to ALWAYS use the attached “Square Footage and Lot Size Advisory and Disclosure” by completing the data in the grid, getting it signed by the Seller so as to establish that the Seller is not aware of any other size data or documents, and then delivering the completed form to the Buyer prior to the ratification of the purchase agreement. This is true even if you only have one square foot/lot size number which is auto-populated into the MLS.
4. As part of any presentation protocols that are disseminated to other real estate agents, Listing Agents can insist that the Buyer return a signed copy of the completed Square Footage and Lot Size Advisory/Disclosure before, or with, their Offer to purchase. If that does not occur, Listing Agents can recommend that the Sellers attach a copy of that document to a Counter-Offer which includes the following suggested language:
“Buyer acknowledges receipt of the attached Square Footage and Lot Size Advisory and Disclosure and understands that it is Buyer’s obligation to investigate the size data as recommended in that form.”
5. If it was not possible to get the completed Square Footage and Lot Size Advisory and Disclosure signed by the Buyer prior to contract ratification, then, at a minimum, every reasonable attempt should be made to prove that the form was delivered to the Buyer prior to removal of any inspection contingencies.
BUYER’S AGENTS:
1. The best practice for Selling Agents is that, upon receipt of a Square Footage and Lot Size Advisory and Disclosure or a comparable document from the Listing Agent, promptly provide the form to the Buyer and get proof of delivery (e.g., the Buyer signs the form) prior to ratifying the purchase agreement.
2. If Listing Agent does not provide a Square Footage and Lot Size Advisory and Disclosure, or a comparable document, then prepare the form with the size information that has been provided in the MLS and/or the Listing Agent’s marketing materials, or any other materials that the Selling Agent has obtained. The Selling Agent can request that the Seller sign the form so as to confirm that the Seller has no additional knowledge or documents regarding the size issues referenced in the form and then promptly provide the completed form to the Buyer. Proving that the Buyer received that information prior to ratification of the Purchase Agreement is actually meeting the Selling Agent’s fiduciary duties.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is attorney-client privileged and 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.
© Copyright Broker Risk Management 2017 10/13/17
(Insert Brokerage Name)
SQUARE FOOTAGE & LOT SIZE ADVISORY AND DISCLOSURE
Property Address: __________________________________________________________________________
DIFFERENT SOURCES FOR SQUARE FOOTAGE AND OTHER MEASUREMENTS:
Measurements of structures vary from source to source and that data is often contradictory. There is no one “official” size source or a “standard” method of calculating exterior structural size, interior space or square footage. For instance, Appraisers often exclude the thickness of walls, stairwells and laundry rooms to determine “livable” square footage; however, architects and other floor-plan design professionals employ a wide variety of methods to calculate the size of improvements. Assessors generally use gross, permitted size. Measurements taken by various professionals may not include some “finished” or “unfinished” space and generally exclude known illegal space.
Buyers should not rely on any advertised or disclosed square footage measurements and should retain their own experts to measure structural size and/or square footage during their contingency period, if any. This is especially important if Buyers are using square footage to determine whether or not to purchase the Property and/or are using a price per square foot to determine purchase price. Price per square foot calculations are generally broad estimates only, which can vary greatly depending upon property location, type of property and amenities; such calculations should not be relied upon by Buyers and the accuracy of any such figures should be independently verified by Buyers with their own experts including, but not limited to, a licensed appraiser.
PROPERTY SIZE, DIMENSIONS, CONFIGURATIONS AND BOUNDARIES:
Fences, retaining walls, hedges and other landscaping, watercourses or other natural or man-made structures may not correspond with any legally-defined property boundaries, and existing structures or amenities may not be located within the actual property boundaries or local setback requirements. There are sources available which refer to lot size, lot dimensions, location of improvements and property configurations, such as the County Assessor, Recorded maps, Developer plans or existing surveys, but that documentation may not be accurate, may not be available, and should not be relied upon by Buyers for any purpose. If lot size, dimensions, boundary lines, property configurations, locations of improvements are important to Buyers’ decision to purchase or the price Buyers are willing to pay, then Buyers should independently investigate by retaining the services of a licensed surveyor, the only professional who can accurately determine lot dimensions, boundary locations and acreage for the Property.
Different sources of exterior and/or interior structural size, square footage and/or lot size may include the following sources noted in the chart below: (NOTE: Any numbers inserted into the spaces below are approximations only, were taken from the referenced source, and other size numbers may exist from other sources.)
If no numbers are included in the chart above, the undersigned Agent is not aware of any size discrepancies in the structure or lot.
Seller and Real Estate Licensees have not and will not verify the accuracy of any representations from any source regarding acreage, lot sizes, dimensions, configurations, dimensions or boundary lines/markers, location of improvements, square footage numbers, or price per square foot estimates. Agent will not be conducting any on-site or off-site investigations to determine the existence of any other sources for that information.
The chart above was completed by the undersigned Agent on __________________
Agent Name: ________________________________ Agent Signature ____________________________________
The undersigned Seller acknowledges receipt of a copy of this Advisory/Disclosure and confirms that Seller does not have any information or documentation that differs from the information contained in the chart above.
Date: __________ Seller: _________________________________ Seller: ________________________________________
I acknowledge that I have received a copy of this Advisory/Disclosure:
Date: __________ Buyer: _________________________________ Buyer: _______________________________________