Fraud in a Real Estate Transaction, whether residential or commercial, usually occurs when there is a material misrepresentation of facts, concealment or nondisclosure of facts or where there is a breach of fiduciary duty by the real estate agent or employing real estate broker. Our most common inquiries are based on fraud or concealment in a real estate transaction and usually involve a seller's non-disclosure of facts or an agent that breaches his/her fiduciary duty. Our Los Angeles Real Estate Fraud lawyers are experienced at dealing with nondisclosure and fraud issues in real estate transactions.
Seller's Duties to Disclose in a Real Estate Sale or Transaction - Sellers in a Real Estate transaction have a duty to disclose all known material defects in the property, the title to the property, or other material matter that would affect the buyer's decision. Whether a fact is material is determined based upon the buyer's point of view. If a fact effects the desirability or value of the property, or in any way effects the decision to buy or not and at what price, then the fact is material to the real estate transaction and must be disclosed to the buyer. "As-Is" purchases do not circumvent this duty to disclose. Keep in ming that the disclosures made during escrow with the Real Estate Transfer Disclosure Statement pursuant to California Civil Code § 1102 et. seq. also does not relieve the Seller from disclosing known facts not covered or included with the Transfer Disclosure Statement.
Seller's Agent or Broker's Duties in a Real Estate Sale - California law is very clear, if a seller's broker has knowledge of material facts, not known to the buyer, the seller's broker is under a duty of disclosure and may be held liable for mere nondisclosure since his/her conduct in the transaction amounts to a representation of the nonexistence of the facts which he has failed to disclose. Holmes v. Summer (2010) 188 Cal.App.4th 1510.
The California Appeals Court in Easton v. Strassburger, (1984) 152 Cal. App. 3d 90 explained the purpose behind the rule that a seller's broker has a legal duty to disclose known or discoverable facts to a buyer as follows:
“The primary purposes of the Cooper-Lingsch rule are to protect the buyer from the unethical broker and seller and to insure that the buyer is provided sufficient accurate information to make an informed decision whether to purchase. These purposes would be seriously undermined if the rule were not seen to include a duty to disclose reasonably discoverable defects. If a broker were required to disclose only known defects, but not also those that are reasonably discoverable, he would be shielded by his ignorance of that which he holds himself out to know. The rule thus narrowly construed would have results inimical to the policy upon which it is based. Such a construction would not only reward the unskilled broker for his own incompetence, but might provide the unscrupulous broker the unilateral ability to protect himself at the expense of the inexperienced and unwary who rely upon him. In any case, if given legal force, the theory that a seller's broker cannot be held accountable for what he does not know but could discover without great difficulty would inevitably produce a disincentive for a seller's broker to make a diligent inspection. Such a disincentive would be most unfortunate, since in residential sales transactions the seller's broker is most frequently the best situated to obtain and provide the most reliable information on the property and is ordinarily counted on to do so.” Easton supra 152 Cal. App. 3d at 99.
"As-Is" Real Estate Sales - Sellers and Seller's Agent are always under a duty to disclose concealed or known material facts that are not known or observable by the buyer. A property sold "As-Is" means that the buyer is buying the property in the condition that is visible or observable to the buyer. Therefore, when the Seller or the Seller's agent fails to disclose all material facts regarding the condition of the property that are unknown to the buyer, the "As Is" provision will not relieve the Seller or Seller's Agent fraud liability arising from the nondisclosure. The California Supreme Court has made it clear that a seller cannot contract his/her way out of a fraudulent transaction. Herzog v. Capital Co. (1945) 27 Cal. 2d 349.
Buyer's Agent or Broker's Duties in a Real Estate Sale - Your Real Estate agent or broker owes you the highest duty of loyalty, good faith, reasonable care and honesty. These duties are known as Fiduciary Duties. If your agent or broker knows of material facts, he/she is under the highest duty to disclose those facts, even if it results in a canceled sale.
Our Los Angeles Real Estate Attorneys are experienced at litigating real estate fraud and nondisclosure issues arising in real estate sales and transactions. Contact us today for a free consultation.
See our interview on Southern California Homes, a top site for California homes for sale, New Mexico real estate, Northern California real estate & Los Angeles, CA real estate: Protecting Yourself from Real Estate Fraud.