NEW FEATURE: REAL ESTATE GONE BAD – True Litigation Stories from Prudential California Realty

September 17th, 2011 at 11:48 pm

In our continuing effort to help you stay out of trouble, we have decided to share the stories underlying some of our lawsuits with you.? ? These true stories of transactions “gone bad” will be posted on a periodic basis to show the truly small things that have actually resulted in your colleagues getting sued.? ? Our first story arises from nothing more than an agent doing a “favor” for their uncle.? ? In this case, the uncle was selling a property without an agent, as a FSBO.? ? The uncle asked our agent for some help and, of course, she was happy to oblige.? ? As a result, by her own admission, our agent helped her uncle get a title report for the property and acted as a messenger between him and the buyer.? ? She had no listing agreement, did not advertise the property and did NOT get a commission.? ? Everything she did was for free and was truly done as a favor.? Unfortunately, when the deal closed, it turned out that the subject property was land locked and had no ingress or egress.? ? Further, the neighbors refused to allow the buyer to use their properties for access.? ? As a result, the buyer sued the uncle, our agent and Prudential.? ? The claim against us was that we were actually the listing broker on the property and therefore had disclosure obligations.? ? Plaintiff pointed to an Amended Preliminary Title Report from Chicago Title that was addressed to our agent.? ? They also pointed to the Purchase Agreement, prepared by the buyer but never corrected, which listed Prudential as the listing broker.? ? And, of course, they pointed to our agent’s contact with the buyer directly, when she acted as a “messenger.”

Our defense was fairly simple: We were not involved in the transaction in any way.? ? We prepared no documents, earned no commission, and did not advertise or list the property in the MLS.? ? In short, only documents prepared by others identified Prudential.? ? Unfortunately, when provided to the Judge, the few things our agent did do were enough to get by a Motion to Dismiss.? ? While we still could have prevailed at trial, there was enough of a question as to whether our agent created “apparent authority” to allow the case to continue.? ? This “apparent authority” justified the buyers reliance on our actions.? ? As a result, the case would continue, with the resulting fees and risk involved.? ? ? Therefore, despite earning nothing and knowing we did not do anything wrong, the right business decision was to settle the case, which we did for $25,000.? ? So, a simple favor for a relative resulted in our agent spending months as a defendant, as well as the payment of legal fees and a large settlement.? ? You have to realize that, because of your profession, anything you do related to real estate could affect your license and is done on behalf of the Company.? ? Unless the file is documented very well, with the Legal Department’s help, every real estate action you take is as a licensee and on our behalf.? ? Please remember that the next time someone asks you for a “favor.”

As always, please let us know if you have any questions.

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