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Thank you in advance for your assistance. We are in the state

Thank you in advance for...
Thank you in advance for your assistance. We are in the state of California. We are currently in the process of purchasing a home. Our date for removal of contingencies will be in 5 days. We have realized that the listing agent, with the knowledge of the seller, knowingly listed the property as being 317 sf larger than it actually is based on the appraiser's measurement and based on public records. The same agent had purchased the property for this buyer about one year ago. In a conversation today he admitted to my agent that both the seller and him knew the true square footage when they purchased the property. He stated that he discussed it with the seller and yet went ahead and listed the property for the incorrect number. At the time we singed the purchase contract and based on the market values the price/sf for the property was $388. If we recalculate based on the actual square footage, the price comes up $20 per sf more. With the market values here, that equals $123,000. We had hoped that this house would be a good investment. If we purchase at the contract price we will have to list the property for the proper square footage and potentially stand to loose a very substanial sum of money on our investment. In addition we had to liquidate assets to make cash available to purchase the property. In that process we lost $30,000. We have also spent an additional $1,400 for mortgage fees and physical inspection so far.

We do understand that the listed square footage for real estate properties is frequently incorrect and that the buyer has an obligation to confirm. But in this case the misrepresentation was knowing and intentional and has resulted in current losses and potential future losses.

We would like the seller/ leasing agent to give us an adjustment for the $123,000. Of course they are refusing. Do we have legal grounds to have the seller/agent mitigate this intentional misrepresentation? What are all the different avenues that we should pursue to accomplish this goal?
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Answered in 42 minutes by:
5/11/2013
TJ, Esq.
TJ, Esq., Attorney
Category: Real Estate Law
Satisfied Customers: 12,555
Experience: JD, MBA
Verified

Hello and thank you for allowing me the opportunity to assist you.

I'm truly sorry to say that you likely have no recourse.

First, most real estate deals are not based upon square footage. In other words, you likely did not make an offer to pay $388 per square foot. Instead, you likely made an offer to pay, let's say, $500,000, for the entire property after viewing it. In that scenario, courts generally rule that you saw what you were getting for your $500,000 offer, and the square footage is irrelevant.

Second, most likely, the listing expressly states that you cannot rely on it as accurate, and that you must get it independently inspected.

Third, you can still back out of the deal since you have 5 days until removal of the contingencies. Accordingly, now that you know of the true square footage, if you proceed to purchase the property, you will be tacitly accepting the square footage. Of course, your argument is that even if you back out of the deal, you lost $30,000 in liquidating assets to get ready to purchase the property. However, the seller will correctly point out that he didn't tell you to do that. He had no control over what you liquidated, and it was not foreseeable that you would lose $30,000 while preparing to purchase the property.

I realize that my answer is bad news and it is certainly not what you wanted to read. However, please understand that it would be unfair to you (and unprofessional of me) to provide you with anything less than an honest response. But if your concerns were not satisfactorily addressed, then please let me know, and I will be happy to clarify my answer. I do ask that you rate me based upon whether I answered your question, and not based upon whether the answer was good news or bad news. Your positive feedback is greatly appreciated.

Thank you for using our service!

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Customer reply replied 4 years ago

Promise, I will not rate based on bad news.


 


Knowingly misrepresenting the facts and then signing a legally binding contract constitutes fraud in other professions. It appears that the courts have turned a blind eye to this common fraudulent practice in real estate.


 


To my understanding, real estate agents are licensed professionals. Is there any entity that oversees their professional conduct where we can report this agent to, in hopes that he will not continue this unethical conduct?

Hi again.

Q: Knowingly misrepresenting the facts and then signing a legally binding contract constitutes fraud in other professions.
A: But even if you could convince a court that fraud occurred, you don't have any recoverable damages since you discovered the fraud prior to the sale. Again, the fact that you liquidated assets and took a $30,000 loss in doing so is not a foreseeable damage. Foreseeability is essential in recovering damages in a lawsuit. Theoretically, you may prevail in a lawsuit for reimbursement of an inspection fee and a mortgage application fee, as those are foreseeable damages.

Q: To my understanding, real estate agents are licensed professionals. Is there any entity that oversees their professional conduct where we can report this agent to, in hopes that he will not continue this unethical conduct?
A: Yes. You can file a complaint at THIS WEBSITE. It provides the necessary form and gives information about the process. The agent may be disciplined, such as suspending the agent's license.

I hope that helps. Please let me know if you need further clarification. Thank you for using our service, and again I'm sorry that I could not give you more positive news.
TJ, Esq.
TJ, Esq., Attorney
Category: Real Estate Law
Satisfied Customers: 12,555
Experience: JD, MBA
Verified
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Category: Real Estate Law
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