Real estate licensees and other staff members must always be careful about the statements they make. They must be sure that the customer understands whether the statement is an opinion or a fact. Statements of opinion are permissible only as long as they are offered as opinions and without any intention to deceive.
Statements of fact must be accurate. Exaggeration of a property’s benefits is called puffing. While puffing is legal, licensees must ensure that none of their statements can be interpreted as fraudulent.
Fraud is the intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person. That includes not only making false statements about a property but also intentionally concealing or failing to disclose important facts.
The misrepresentation or omission does not have to be intentional to result in licensee liability. A negligent misrepresentation occurs when the licensee should have known that a statement about a material fact was false. If the buyer relies on the licensee’s statement, the licensee is liable for any damages that result. Similarly, a licensee who accidentally fails to perform some act for instance, forgetting to deliver a counteroffer, may be liable for damages that result from such a negligent omission.
If a contract to purchase real estate is obtained as a result of fraudulent misstatements, the contract may be disaffirmed or renounced by the purchaser. In such a case, the licensee not only loses a commission but can be liable for damages if either party suffers loss because of the misrepresentation. If the licensee’s misstatements were based on the owner’s own inaccurate statements and the licensee had no independent duty to investigate their accuracy, the licensee may be entitled to a commission, even if the buyer rescinds the sales contract.
