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By David Hamerslough

I’m often asked what type of lawsuits are currently being brought against real estate licensees. The answer always depends, among other factors, upon market conditions, the needs and expectations of the parties, the facts and circumstances of the transaction, and the documentation relating to the transaction. In this article, I will discuss some of the current claims being made against listing agents and describe what a real estate attorney might look at when evaluating these claims. Next month’s article will discuss some of the claims currently being brought against selling agents.

Current market conditions have produced claims from sellers that fall into two broad categories: the first is a claim that the house sold at too low a price, and the second is a claim that the seller netted less than they thought they would.

The first type of claim often arises because the property is an off-market listing or because of a claim that it was otherwise not adequately exposed to the market. Another aspect of this kind of claim is that the property did not sell for as high a price as it should have due to the agent’s lack of knowledge of market conditions or an ineffective marketing strategy.

What a lawyer might evaluate with respect to these types of claims includes why the property was off the MLS, if that was the case, what explanation, if any, exists in writing regarding why that decision was made, whether that decision was knowingly made by a fully informed seller or on the suggestion of the listing agent, whether the sale was an in-house transaction, what other offers were made, how the terms and conditions of those offers compared to the offer that was accepted, why that offer was accepted over the competing offers, what documentation, if any, exists regarding the analysis of the offers and the discussion of them with the seller, the commission offered and paid, other concessions made by the listing agent and/or seller, and the impact of any upleg or downleg transactions on the part of the seller or successful buyer.

With respect to those claims relating to the pricing of the property, a lawyer may evaluate the listing agent’s knowledge and experience with respect to properties in the same neighborhood or geographic area, the existence and implementation of a marketing plan, the effectiveness of that plan, the existence and quality of any CMA, any other factors that might affect the listing agent’s strategies with regard to the foregoing, whether current appraisals exist, and what the relationship is between those appraisals and the listing and sale price.

A lawyer is going to look for any communication between the parties on these subjects and will determine if there is a written comparative market analysis with printouts describing comparable properties, if the property is off market, whether the appropriate documentation was used and whether that documentation provides the reason behind the seller’s decision not to put the property on the MLS, whether there is a written analysis of the competing offers and any indication of why one was viewed as stronger or better than another, whether current appraisals exist and the relationship of the listing and sale price to those appraisals, any documentation regarding any upleg or downleg transactions and if there were any concessions made that had an impact on the subject transaction, any written marketing plan, the degree to which the plan was implemented, and to what degree the plan was consistent or inconsistent with marketing plans used in other similar transactions handled by the listing agent. Specific examples of the type of documentation in this last category would include statements made by a listing broker on their website regarding their marketing strategies or evidence of actual marketing efforts for similar properties.

With regard to a claim by a seller that they did not net as much as they thought they would, a lawyer may evaluate what costs the seller incurred, whether they were known to the seller and listing agent at the time of the transaction and, if not, why the information was not available, how that information could have been obtained, and who was directly involved in handling or evaluating any of the issues related to these costs. The documentation that a lawyer might review would include a net sheet, reports regarding the condition of the property, repair proposals, loan documents, and costs relating to title and escrow.

This article has identified what a lawyer might examine or look for when representing a seller against a listing agent for claims regarding the pricing and net proceeds from a sale. Understanding how a lawyer approaches this type of case can help listing agents better meet the expectations of their clients.