Oklahoma Supreme Court ruling impacts Oklahoma’s real estate industry.

The Oklahoma Association of REALTORS® wants to inform you of a recent Opinion by the Oklahoma Supreme Court and its impact on Oklahoma ’s real estate industry.

On June 30, the Court issued an Opinion in Bowman v. Presley which reversed prior rulings and permitted a lawsuit by the buyers to go forward against both the sellers and the listing REALTORS® in a dispute over square footage.  REALTORS® who listed a house for sale with a stated square footage “per courthouse records” now have to defend, along with the sellers, the square foot amount even though they were just passing information on to buyer, according to a decision in a civil lawsuit brought by the buyers in Pottawatomie County.

The house at issue in the lawsuit was listed in 2005 as having 2,890 square feet, which matched the County Assessor ’s data. The house was listed for sale by a REALTOR® who was also the mother of the seller.  After closing, the buyers obtained a copy of their lender’s appraisal, which measured the house size at less than 2,200 square feet. The buyers also obtained an appraisal completed for the sellers five years earlier, from the same appraiser, which had also stated that the house was less than 2,200 square feet. A third appraisal by the same appraiser, also five years earlier, had indicated that the house was 2,468 square feet.  With so many different figures, the Court ruled that the issue of the house’s actual size was unclear.

The REALTORS® argued that the buyers had signed closing releases and had ample time to inspect and measure the house before closing.  The REALTORS® asserted that the listing information accurately quoted the Pottawatomie County Assessor’s data for tax assessment purposes and that the MLS listing included a disclaimer that the data presented might not be accurate. They also asserted that the purchase contract itself contained a disclaimer acknowledging that the REALTORS® would not be held responsible for inaccurate square footage information.

In its recent opinion, the Court held that the particular facts of the case raised a question of whether the REALTORS® had misrepresented the property size “unreasonably, recklessly or dishonestly.”  Bypassing the several disclaimers and releases, the Opinion implies that passing along inaccurate square footage data allows a negligence claim based on the licensee’s duties pursuant to the Real Estate License Code regardless of any contrary express contractual terms.  The Court’s decision allows the buyers a trial even if they saw a disclaimer by letting them challenge whether the REALTORS® knew or should have known, in the exercise of “reasonable skill and care,” that the courthouse information quoted in the MLS listing was inaccurate.

OAR is working on long term solutions to the issues raised by this decision.  We are exploring different ways of addressing these problems, including a potential legislative solution early next year.  In the meantime, here are some recommendations on different steps to protect against unexpected lawsuits, especially in a turbulent market in which buyers may regret their purchase if their house value appears to be falling.  Please note that these options might provide some protection, but there is no guarantee of removing all exposure.

1.      Be aware that different appraisers may apply the rules for measurement of a property differently. Never represent that a particular measurement is necessarily accurate.  Instead, always qualify any statement about size with terms such as “estimated,” “approximate,” “appraiser’s opinion,” “builder’s opinion” or “assessor’s opinion.”

2.      To avoid any and all potential liability altogether, a broker may choose not to quote square footage.  However, we understand that a discussion of square footage may play an important role in your day to day business, and many buyers may ask for this figure.  With this in mind, when providing “appraisal,” “builder’s plans” or, if you must, “courthouse” information as a source for square footage data, consider having buyers who present an offer sign an acknowledgment before the offer is accepted by the sellers, such as the following:

“I/we acknowledge that information provided to me from other sources, including, but not limited to, square footage estimates from prior appraisals, builder’s plans or courthouse tax records may be materially inaccurate due to various causes such as alterations to the property or errors in the methods used to calculate the information given. Square footage information provided is for the purpose of marketing, may not be exact and is NOT suitable for loan application, valuation or any other purpose. I/we acknowledge that the Offer being made to purchase ______[property description] is based on our personal viewing and opinion of the property and does not rely upon any information except as specifically contained in the Real Estate Purchase Contract.  I/we acknowledge that the both the Listing and Selling Brokers and/or Associates involved in the transaction do not warrant or make any representation concerning the accuracy of any information from third parties and acknowledge receipt of this information disclosure.”

3.      If providing estimated square footage is needed, use common sense when inputting MLS listing information. If experience has shown that courthouse records tend to be inaccurate, ask the seller to provide a copy of an appraisal or the builder’s plans to rely upon instead, and show the date of the appraisal or the plans.

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