REAL ESTATE FRAUD
One of the most complicated and overlooked aspects of selling real estate deals with fraud and disclosure. There are many gray areas in this subject. The following will give some insight to the issues, but if you have a question relating to this issue you should either consult your Broker, an attorney, or both.
A material representation, which is false, known to be false or made recklessly, made with inducement to be acted upon, acted in reliance thereon, causing injury.
WHAT IF YOUR CLIENT WAS SILENT?
“Where there is a latent defect known to seller and he remains silent with the knowledge that the buyer is acting on the assumption that no defect exists, the buyer has cause of action against the seller for an intentional omission to disclose such latent defect.”
23 Am.Jur. ‘Fraud and Deceit’ 78, p. 854.
Silence does not constitute fraud where it relates to facts open to common observation or discoverable by the exercise of ordinary diligence, or where means of information are as accessible to one party as to the other. Id.
WHAT CAN YOU DO IF YOU THINK OR KNOW YOUR CLIENT IS COMMITTING FRAUD?
Either party can unilaterally terminate the Realtor-client relationship. If it comes to that, the party who terminates could be liable for breach of contract in the Listing Agreement or Buyer’s agreement. Be sure to weigh your options and talk to your broker about the problems. You could ruin your reputation, have a financial penalty, and possibly lose your license. Fraud and misrepresentation should not be taken lightly.
WHAT HAS TO BE DISCLOSED?
- If the agent has any business, family or personal relationship with on the parties it must be disclosed.
- Lead Paint Disclosure – pre-1978 housing Lead-Based Paint Hazard Reduction Act of 1992. FSBO ramifications
- Disclose any known info concerning lead-based paint or lead-based paint hazards
- Location of the paint and or hazards, condition of the surfaces
- Provide any records and reports on lead-based paint or hazard with are available to the seller
- Sellers must provided buyers a 10-day period to conduct an inspection or risk assessment – can be shortened or waived in writing
- Must retain a copy of the disclosure for no less than three years
- Inducement/Rebate Disclosure – Licensed Realtors may now offer inducements and rebates as long as such inducements and rebates are disclosed in writing. These rebates include finder’s fees, rebates to your clients after the closing, a percentage of your commission to your client, etc.
- According to the Kentucky Real Estate Commission, there is no specific stigmatized property law in the State of Kentucky. If you want to know whether there has been a murder, suicide, violent crime or ghost in a particular home, you must ask the question. Once asked, the seller or the seller’s agent must disclose the information. However, without being asked, there may be instances where the seller has not disclosed such information, and by law is not bound to disclose. Likewise, as a seller, you must determine whether a murder, suicide, violent crime or ghost in your property has created a stigma and therefore a defect.
STANDARDS FOR ADVERTISING DISCLOSURES
Print advertising must comply with the following:
- Include the company or broker’s name
- Can’t be false or misleading
- You must have written listing agreement before advertising the property
- You can’t place a sign on any property without consent of owner
STANDARDS FOR INTERNET ADVERTISING DISCLOSURES
- A real estate Internet real property advertisement of a licensee, or offer, or solicitation to provide brokerage services by a licensee, related to marketing or identifying real property for sale or lease shall include:
- The name of the principal broker of the company with whom the licensee is affiliated, or the name of the real estate company with which the licensee’s license is held.
- A non-principal broker real estate licensee's Internet home page shall include:
- The licensee’s name;
- The principal broker with whom the licensee is affiliated or the name of the real estate company recorded with the Kentucky Real Estate Commission with which the licensee’s license is held;
- A statement indicating the licensee holds a Kentucky license to broker real estate if the licensee's principal business location is outside Kentucky;
- The regulatory jurisdiction of the licensee’s principal business address