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Legally speaking: The case of the deceptive buyer

By Lorie Garland, OAR Assistant Vice President of Legal Services

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. This one involves the implication of not being forthright…

Q: I am a dual agent in a transaction. I know my buyer has not been truthful with the seller regarding his intentions for use of the property. Can this cause a problem for me?

A: Yes, and a recent Guernsey County appellate court decision proves the point. In this case, the agent, a dual agent, knew the buyer was looking to purchase property where he could lease or sell the property’s mineral rights. The agent also knew that the buyer told the seller he was purchasing the property solely for the use of pasture for cattle or other livestock. After closing, the seller learned of the lease and eventual sale of the property’s mineral rights and sued the buyer and the agent for breach of fiduciary duty, fraudulent misrepresentation and fraudulent inducement.

The buyer entered into a settlement agreement with the seller for $450,000. The case proceeded against the agent. The agent admitted that he breached his fiduciary duties to the seller by not correcting the buyer’s known false statement and that his silence was an affirmative adoption of the false statement. The agent also admitted that the false statement was material to the transaction as it affected the sales price for the property.

Due to the agent’s admissions, the trial court granted the seller’s motion for summary judgment. The court found that the agent breached his fiduciary duty to the seller by intentionally misrepresenting the true value of the property and by persuading the seller to sell the property for less than the true value, causing damages of $1,206,100. The damage amount was the true value of the property ($2,116,100) comprised of the amount for the leasing and eventual sale of the property’s mineral rights by the buyer, minus the amount the buyer paid for the property ($460,037) and the buyer’s settlement amount ($450,000). The trial court’s decision was upheld on appeal.

Tags: legal, Legally Speaking