Listing Real Estate Agent's Duty to the Buyer

     Interesting case from the Kentucky courts:  Waldridge v. Homeservices of Kentucky, 2011 Ky. App. LEXIS 81 (Ky. App. April 29, 2011)

     The court held that a sellers' real estate agent owes a duty to a buyer to not commit fraud by either misrepresenting a material fact or failing to disclose a material fact of which he or she has actual knowledge and of which the buyer is unaware. 

     The Waldridges contacted an agent to assist with their search for a new home.  They ultimately purchased a new home which was listed for sale by the same company.  Prior to the purchase of the home, the sellers had noted on the disclosure statement that prior water damage had occurred due to a sump-pump failure.  In fact, the home had been owned by four previous owners, who experienced water damage and flooding, all since the home was built in 1988, and the damage and risk of flooding was much worse than what was noted on the disclosure.  The listing company had been involved with the property for all of its previous sales.

     The court considered whether the listing company or its agent could be liable for fraudulent conduct despite having no contractual relationship with the buyer.  The court found that, even in the absence of a fiduciary duty, a real estate agent  hired by the seller is expected to be honest and owes a duty to third parties involved in real estate transactions.  The court ultimately remanded the case for further fact-finding but suggested that both the listing company and its agent could potentially be liable under these facts.  The court found that it was plausible that the listing company had actual knowledge of the extent of the flooding due to its previous involvement with the sales of the home.  The court further held that a fact question remained as to whether the listing company or its agent knew that the disclosure was false because it was clear that the sellers knew the damage was worse than they reflected on their disclosure statement.