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Water Infiltration/Mold

Type Matter:  Water Infiltration/Mold
Issue:  Can a real estate Agent be held liable for allegedly mis-diagnosing the cause of moisture under or around the property?
Answer: Probably Not

Facts:  Buyers purchased a single family residence with knowledge of a TDS disclosure relating to a sump pump under the home. Inspection discovered standing moisture under and around the residence. Buyers waived contingencies after having received a credit in lieu of discovering the source of the condition or making repairs. Buyers sued the listing Broker based upon an alleged conversation wherein the Agent described the condition as being related to over watering by the gardener.

Results:  This court granted Summary Judgment for the listing Broker. The court ruled in favor of the Broker based on the rule of law indicating once a condition is disclosed and known, it is up to the Buyers to perform due diligence and investigate the condition, including its cause. The court held that Buyers should not rely on comments made by real estate professionals in this regard, and that such comments, if any, do not relieve Buyers of the responsibility and obligation to investigate. Moreover, since Buyers chose to waive contingencies and obtain a credit, they shouldn’t be able to complain about a condition known and disclosed prior to close of escrow. This said, there have been cases where the court ruled that the comments by the Broker were a negligent misrepresentation of facts and the Broker was thereby liable.

Lesson:  While Buyers have a duty to perform due diligence and investigation, a real estate professional should be careful and not make representations regarding a possible source or cause of any condition. A Broker’s job is to simply identify defects, not to diagnose the cause of severity of the defects. Once a Broker goes from identification to diagnosis, that Broker has exposed himself/herself to liability for any errors in such diagnosis. In this case, the Broker was lucky that the court put as much wait on the Buyer’s decision to accept credit in lieu of further investigation.

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