Q: Real estate agents and brokers in the District of Columbia have recently gone to a computerized system for muliple listings. This makes the service more available to brokers such as myself. Before we got the computer, we had to rely on word of mouth and newspaper advertisements to find properties for our prospective clients.
I am troubled, however, with my potential liability if I am the lister of property that is ultimately sold by by a broker who finds the property on the multiple listing. Am I, the listing broker, responsible for representations and claims made by the selling broker?
A: At least one court in the United States has made it quite clear that you would be responsible for any such misrepresentations or negligence even though you were the innocent party in the transaction.
In a recent case in Washington state, the facts were as follows: A church wanted to find a location to build a new building and a retirement home. The church contacted a broker and asked him to find suitable property with access to a road. The broker found a piece that looked interesting, and contacted the listing broker for additional information.
The listing broker supplied a map showing three parcels, labeled "X", "Y", and "Z". The listing broker told the church's broker that the property fronted on a street.
Based on this information, the church's broker persuaded his client to buy the land. However, the selling broker failed to compare the legal description with the actual land. After the church went to settlement, they learned that the property included only parcel "Z," which did not front on the street. The church sued both brokers, seeking damages.
The court held both brokers liable for negligently describing the area and the property location. Although the court recognized that it was an honest misunderstanding, and that the listing broker did not personally supply the incorrect information, the court considered the church's broker to be a subagent of the listing broker. The negligence of the church's broker, according to the court, is carried over the law of agency to the listing broker.
Needless to say, the listing agent often has no way of controlling the representations and activities of the selling broker. And yet, the listing agent may be held equally responsible for the negligence of the selling agent.
Although this is a very difficult area, where the answers are not often clear, here are some suggestions for limiting liability of the listing broker and protecting your reputation:
When you obtain a listing agreement from the seller, carefully fill in all of the details in the listing form. Don't rely on chance and memory, and make sure that every blank is filled in - even if you have to put "Not applicable."
When the listing agreement is fed into the computer, make sure that it has been done properly. Get a printout from the computer to check for accuracy.
When you are contacted by a selling agent, spend some time with that agent to explain the transaction. Assure yourself that the selling agent is knowlegable about real estate in your area.
When the selling broker gives you an offer, read it carefully before presenting it to your seller.
Make careful notes in your file of any conversations and activities relating to the transaction. If there is a lawsuit, these notes will refresh your memory several years later.
In the final analysis, there is an element of risk in any business venture. A combination of good common sense and good business practice should keep you out of trouble.
Benny L. Kass ia a Washington attorney. Write him in care of the Real Estate section, The Washington Post, 1150 15th St. NW, Washington 20071.