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Agents are Cautioned When Copying Listings in the Multiple Listing Service

It is a common practice for agents who obtain a listing to review the listing history.  Many agents, when uploading a property to the Multiple Listing Service (“MLS”), will copy over a prior listing from a former listing agent.  Agents are cautioned that when copying a former listing from the MLS that they should review the information carefully to ensure that it is accurate.  Civil Code §1088 provides that agents can be held liable for any errors or omissions on the MLS.  It is almost a strict liability statute.  Therefore, agents are held responsible for the information that they place on the MLS.

Top 10 Current Market Issues

1.    Everything you say in marketing materials can be used against you.  Be careful to balance your marketing interests with your risk avoidance interests.  Always have your client sign off on any marketing materials.

2.    With proper planning and implementation, you can provide the prompt delivery of a thoroughly completed Transfer Disclosure Statement, Sellers Property Questionnaire and Agents Visual Inspection Disclosure to increase the chances of a successful and claim-free transaction.

3.    The Disclosure Documents are for identification of defects, not diagnosis.  Leave the diagnosis to the appropriate experts.  Be careful with respect to which experts are utilized.

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Concerns Regarding Sales Without An Appraisal Contingency

In this extremely competitive buyers’ market, buyers are writing offers without appraisal contingencies.  Appraisals have been somewhat unpredictable over the last several years.  Therefore, to make offers more appealing to sellers, buyers are waiving their appraisal contingencies.  There are a number of pitfalls associated with offers without an appraisal contingency.

If a buyer writes an offer without an appraisal contingency and the loan is denied solely because the property did not appraise, the buyer may likely lose the right to cancel the contract due to the inability of having a loan.  In other words, a buyer will no longer have the ability to cancel the contract as a result of the house appraising for less than the purchase price.

Most buyers believe that if the house does not appraise, they can cancel based on their inspections.  However, the California Association of Realtors’ Residential Purchase Agreement provides that the buyers will act in good faith toward the seller in handling inspections.  Therefore, if there is no particular objection or issue with the property raised by the inspections, the buyers may not be able to cancel the agreement based on their inspections if they cannot identify a legitimate issue of concern with the inspections.

Agents are cautioned to advise clients to discuss these issues with clients before writing offers without an appraisal contingency.

Court Holds Two-Year Statute of Limitations Not Applicable to an Agent’s Obligation to a Buyer

In William L. Lyon & Associates, Inc. v. Superior Court (Henley), a California Appellate Court recently held that the two-year statute of limitations set forth in Civil Code §2079 does not apply to claims brought by buyers against a dual agent.  The Court also held that the two-year statute of limitations on the buyer-broker agreement are subject to the discovery rule.

In William L. Lyon, Henley sued William L. Lyon and their agent, as well as sellers arising out of defects in the paint and stucco of the home they purchased.  The Henleys bought the house after signing a buyer-broker agreement that gave Lyon and the agent the exclusive right to represent them.  Lyon acted as a dual agency in the transaction. 

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A California Appellate Court Recently held that a Claimant’s Right of Recovery

In Worthington v. Davi, plaintiffs sued their real estate agent for breach of contract, fraud, breach of fiduciary duty and other causes of action.  They alleged that their agent fraudulently induced them to purchase several residential properties from the agent’s other clients.  The transactions wiped out the plaintiffs’ life savings.

The case proceeded to arbitration.  The arbitrator found in favor of the plaintiffs and awarded them $280,000.  When the Worthingtons discovered that the defendant’s assets were insufficient, they filed an application before the DRE from the Recovery Account.  The Commissioner granted part of the application and awarded $50,000 for one of the transactions only.  The Commissioner denied coverage on the other three transactions on the ground that the judgment on these claims was based on breach of the broker’s fiduciary duty rather than “fraud, misrepresentation or deceit,” as required by Business and Professions Code Section 104.71(a).

Plaintiffs filed an application before the trial court asking that the court review their requests relating to the three transactions.  The court granted the application as to two of the three transactions supporting the arbitrator’s findings of fraud.  The court of appeals affirmed, holding that the trial court properly reviewed the arbitrator’s detailed findings of fact in assessing the application for payment.

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