It Is A Risk For Real Estate Agents To Represent Both The Seller And Buyer
Written by: Alan Nochumson
From my perspective, it is difficult for that real estate agent and broker to zealously represent these competing interests. What is good for the seller may not be good for the buyer, and vice versa.
In Antantis v. Kolarosky, 2020 Pa. Super. Unpub. LEXIS 878 (March 11, 2020), the Pennsylvania Superior Court recently upheld a jury verdict entered in favor of a disgruntled married couple against their real estate agent and broker (who also represented the seller during the real estate transaction) after they experienced significant issues with the property they purchased after closing took place.
In Antantis, Paul D. Kolarosky retained the services of Remax Community Real Estate to sell his property located in Washington County, Pennsylvania.
Julie Ann Graham, a real estate agent at Remax, was listed as the real estate agent in charge of marketing the property for sale.
William H. Antantis Jr. and Jenna Antantis ultimately retained Graham, through Remax, as their real estate agent. Graham, through Remax, represented the Antantises when they entered into a written agreement with Kolarosky to purchase the property for $149,500.
According to the Antantises, they did not perform an inspection of the property prior to closing because they relied upon advice from Graham that an inspection was unnecessary.
The Antantises asserted that Graham advised them that “’there was no point’ in having a home inspection, and that getting one done prior to closing would be a ‘waste of money.’”
Rather, according to the Antantises, Graham offered to provide them with a copy of an inspection report from a prior potential buyer who chose not to purchase the property.
Prior to closing, an issue arose about the size of the property, the opinion said.
According to the advertising materials for the property, the property consisted of 4.46 acres, the opinion said.
When the Antantises received information that the property may only contain approximately 3 acres, they approached Graham about the situation, the opinion said.
Rather than advising the Antantises to obtain a survey of the property, according to the Antantises, Graham indicated to them a survey showing the property contained 4.46 acres was available from Kolarosky and would be provided to them at closing, the opinion said.
Although that survey was supplied to them at closing, Graham later admitted that the survey was unclear and that, prior to her involvement with the Antantises, she changed the property listing acreage from 3 acres to 4.46 acres at the insistence of Kolarosky, the opinion said.
After closing took place, the Antantises discovered that the property was only approximately 3 acres in size and also encountered several problems that were water related that led to the growth of black mold in their home.
The Antantises subsequently filed a complaint against Graham and Remax, among others, as it related to the damages they sustained due to the size and physical condition of the property.
At trial, the Antantises prevailed against Graham on counts of misrepresentation and breach of contract and against Remax on a count of misrepresentation.
The jury entered a verdict in favor of the Antantises on their claim of breach of contract against Graham, awarding them $25,000 to compensate them for the absence of the 1.46 acres, determined by the percentage breakdown from the tax assessment applied to the property’s appraised value.
The jury also found that both Graham and Remax committed fraud regarding the mold on the property and awarded the Antantises additional damages of $52,008, as outlined on a mold remediation plan they submitted into evidence at trial.
Graham and Remax ultimately appealed the jury verdicts to the Superior Court.
The Superior Court in Antantis first addressed Graham’s contention that the jury’s verdict on the breach of contract count could not be proven as a matter of law because the written contract between her and the Antantises was never introduced into evidence.
The Superior Court flatly rejected that contention.
While acknowledging that the written contract was never admitted into evidence at trial, the Superior Court found that there was sufficient evidence to make out the breach of contract claim against Graham, noting that she testified at trial that she acted as the Antantises’ real estate agent and that she had explained to them how it would be possible to serve in a dual capacity as a real estate agent of both a buyer and a seller.
Furthermore, the Superior Court noted that the written agreement entered into between the Antantises and Kolarosky also established that a contract existed between Graham and the Antantises.
According to the Superior Court, once the existence of the contract between Graham and the Antantises was established, it was not necessary for the exact written terms of the contract to be introduced, since those terms were irrelevant for present purposes because the issue involved not a breach of a specific term but rather a lack of good faith.
Citing to both Kaplan v. Cablevision of Pennsylvania, 671 A.2d 716 (Pa. Super. Ct. 1996) and LSI Title Agency v. Evaluation Services, 951 A.2d 384 (Pa. Super. Ct. 2008), the Superior Court in Antantis noted that “every contract imposes on each party a duty of good faith and fair dealing in its performance and its enforcement” and “this duty of good faith and fair dealing may be enforced in a breach of contract action.”
The Superior Court in Antantis reasoned that the jury had sufficient evidence to conclude that Graham and Remax breached their contract with the Antantises when Graham mislead them about the size of the property.
The Superior Court in Antantis next addressed the challenge made by Graham and Remax as to the fraud claim asserted against them by the Antantises with regards to the existence of black mold in the property.
Graham and Remax argued that any misrepresentation that the Antantises received about mold originally came from Kolarosky and was not intentionally conveyed to them by Graham, who never claimed to have personal knowledge of the property’s condition.
Relying upon Aiello v. Ed. Saxe Real Estate, 499 A.2d 282 (Pa. 1985), the Superior Court stated that “real estate agents are responsible for misrepresentations, both willful and negligent.”
Quoting Glanski v. Ervine, 409 A.2d 425 (Pa. Super. Ct. 1979), the Superior Court pointed out that “even when a real estate broker’s false statement is innocently made, a ‘material misrepresentation may be found whether the agent actually knew the truth or not, especially where, as here, it was bound to ascertain the truth before making the representation.’”
The Superior Court in Antantis noted that there was sufficient evidence from which the jury could conclude that the Antantises carried their burden of proving Graham’s negligent misrepresentation, making Graham and Remax liable for their resulting damages.
Even if Graham did not know or explicitly claim to know whether the house had mold, the Superior Court in Antantis found that “she still dissuaded the Antantises from having the home inspected for that defect without making a reasonable investigation of the truth of her advice” and, in following the advice of their real estate agent to their detriment, the Antantises, in their own relative inexperience in the real estate industry, suffered damages due to the existence of black mold in their home.
The Superior Court in Antantis also determined whether Remax should be held liable on the fraud claim for Graham’s conduct because she was an independent contract, not an agent or employee, of Remax.
In making this determination, the Superior Court in Antantis noted that the Pennsylvania Supreme Court rejected a similar argument under analogous circumstances in Aiello.
In Aiello, the Supreme Court concluded that, after reviewing the underlying factual circumstances, a real estate agent was not deemed an independent contractor of the real estate agency and that the agency could be liable for the real estate agent’s misrepresentations.
The Superior Court in Antantis relied upon the following evidence submitted at trial which established the test for agency in the real estate context—Graham maintained an office at Remax’s physical office location, Remax assigned Graham to the property after Kolarosky called Remax’s main office line for representation in the sale of his property, and the contract entered into between Kolarosky and Remax authorized Remax to compensate its “subagents, buyer-agents and transactional licensees including the share of part of its commission.”
When a real estate agent and broker represents both sides of a such a real estate transaction, some of the knowledge of the property may be imputed unto them.
Furthermore, the advice, or lack thereof, given by the real estate agent and broker to their buyer will be heavily scrutinized and critiqued.
For these reasons, the real estate agent and broker must determine whether the reward (i.e., the added commission representing the buyer) outweighs the risks associated with representing the seller and buyer in the same transaction.
Reprinted with permission from the April 6, 2020 edition of The Legal Intelligencer © 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, firstname.lastname@example.org or visit www.almreprints.com