Real estate agents possess a greater likelihood of being sued than doctors. Why? We like doctors. Oh, and doctors, unlike real estate agents, are protected by a number of statutes that make it almost impossible to succeed. For real estate agents, the best protection in a lawsuit is the terms of their contracts.
Should a real estate agent representing a seller verify that the seller actually owns the property? What happens when the seller does not? More importantly, what happens when the seller cannot close on the sale of property because he does not own the property? The answer is guaranteed – no commission and a lawsuit.
So, does a real estate agent possess a legal obligation to perform a title search? What steps does the real estate agent need to take to verify that the seller actually owns the property?
The answer is – none provided that the contract with the buyer includes the following disclaimer:
Disclaimer. It is understood and agreed that the real estate firms and real estate licensee(s) representing or assisting the Seller or the Buyer are not parties to their Agreement and do not have or assume liability for the performance or nonperformance of Seller or Buyer. Buyer and Seller agree that the Brokers shall not be responsible for any of the following, but not limited to, those matters which could have been revealed through a survey, flood certification, title search or inspection of the Property; for the necessity or cost of any repairs to the Property, any portion thereof, or any item therein; for the necessity or cost of any repairs to the Property; for hazardous or toxic materials; for the tax or legal consequences of this transaction; for the availability, capability, and/or cost of utilities, sewer, septic, or community amenities; for applicable boundaries of school districts or other school information. . .if any of these matters or any matters are of concern to them, they shall seek independent expert advice relative thereon.
Of course, if the real estate agent actually knows that the seller does not own the property, the disclaimer does not work. And, if the real estate agent does a title search and fails to find the “cloud on the title,” the agent could be guilty of negligent misrepresentation. So, it would appear that for now ignorance of the state of title is blissful ignorance.
THE MORAL OF THIS STORY – ALWAYS TELL THE TRUTH, AND ALWAYS READ YOUR CONTRACTS CAREFULLY.
For the whole story, see Morgan Development, LLC v. Raymond W. Morrow, E2010-00610-COA-R3-CV (Tenn. Ct. App. Feb. 23, 2011).
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