Tax season comes with its own unique set of challenges for real estate professionals. Even a simple error of entering incorrect information can lead to a slew of issues.
The owners of a residential home contacted a real estate agent to list and sell their property. The real estate agent then went to the town hall to research. There, the real estate agent found the amount of the annual property taxes to enter in the agency’s marketing brochure and in the region’s Multiple Listing Service (MLS).
The agent entered the wrong property tax information into both the marketing brochure and the MLS.
When researching, the real estate agent interpreted the property tax figure incorrectly. They thought it was the amount for an entire year when it was actually only the amount for six months.
The listing agent found a buyer for the property who entered into a purchase agreement in part based on her understanding that the property tax information was correct. At the closing, the buyer discovered that the actual taxes were twice the amount advertised.
The buyer decided to proceed with the purchase but then sued the sellers and real estate agent alleging intentional and negligent misrepresentation. The buyer claimed they owed her the difference between the real tax amount and the advertised tax amount multiplied by the length of her 30-year mortgage commitment. The sellers then filed a counterclaim against the real estate agency and broker alleging failure to property supervise the agent.
The case was settled after the initial investigation confirmed that the real estate agent did in fact incorrectly transfer the property tax information from the town’s tax records. The defendants incurred significant legal fees negotiating the true amount of damages. It was the defendants’ position that the damage should be based on the average length of home ownership and not the length of a mortgage commitment. Compounding the problem, the local real estate board also took disciplinary action against the agent.
Even simple errors in transferring tax records into the MLS and advertising materials can result in a likelihood of litigation for the involved real estate professional and their agency. A mistake on the annual taxes of a property may create an exposure for the duration of a buyer’s ownership.
If this real estate firm had employed a system to accurately verify information obtained by its agents and sellers, it may have been able to avoid litigation and a compromised reputation in the community.
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The purpose of this article is to inform and insulate real estate professionals from potential monetary claims and professional grievances. The fact patterns are from actual claims against real estate agents. While the author is an experienced claims representative, the opinions expressed herein are general in nature, not fact nor state specific; and therefore, should not be taken as a substitute for legal advice from an attorney licensed in your state. This article was produced in conjunction with AXA XL and is not to be taken as legal advice.