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What Is Misrepresentation in a Real Estate Litigation Case?

Posted on in Commercial Litigation

Milwaukee civil litigation attorney for real estate disputesBy Attorney Jaclyn Kallie

Misrepresentation is the misstating of facts relevant to a property during a real estate transaction, and it is the most common claim made in real estate litigation cases. Misrepresentation typically takes the form of massaging facts to seduce the buyer into purchasing. Misrepresentation can include outright fraud, but it is mostly thought of as the gross exaggeration of the features relevant to real estate.  

Misrepresentation in Real Estate Litigation

Misrepresentation is a thorny issue, because it can be subjective. Real estate agents use hyperbole and exaggeration constantly when dealing with clients. A seller may use colorful language to entice a person to buy real estate, but if an exaggeration or misstatement has a significant financial impact, the buyer may have recourse to seek compensation. Misrepresentation mainly pertains to the hard facts and whether the approximation of the seller is more correct than wrong.  

One of the best-known cases dealing with misrepresentation in real estate litigation is Furla v. Jon Douglas Co. (1998), which took place in California. In this case, the plaintiff sued the defendants over misrepresentation of the size of a mansion. During the negotiations, the defendant had claimed the mansion was approximately 5,500 square feet but never gave an exact measurement. The plaintiff agreed to pay $170 per square foot, for a total of $935,000 for the home. Years later, the plaintiff had the home appraised and discovered the mansion was actually between 4,130 square feet and 4,615 square feet. Realizing he paid several hundred thousand dollars more than he needed to, he then sued the defendants. The case had strong arguments on both sides. The defendants claimed that the information they presented to the plaintiff was based on the architectural plans and an appraisal by the county assessor. Given the nature of the mountainous landscape, determining the gross living area was based on approximation and could differ between appraisers, as the plaintiff demonstrated.

Further, the defendants had encouraged the plaintiff to use a separate appraiser, which he did not do during the time of escrow. The jury ruled in favor of the defendant. The plaintiff appealed, and the appellate court ruled in the plaintiff’s favor, accepting his reasoning that it was the obligation of the seller to provide accurate information to the buyer and that the buyer did not need to have his own appraiser. Further, the defendant's use of the word “approximate” was grossly exaggerated, considering how their estimation was more than 20 percent larger than the actual size of the residence. It is assumed that being the owner of the property, they would have an accurate appraisal or a closer approximation of the property's size. The appellate court sent the case back to the jury court, and the defendants settled with the plaintiff. 

Contact a Milwaukee, WI Real Estate Litigation Attorney

When selling or buying real estate, it is essential to be sure that all the facts are presented straightforwardly and accurately. If you are involved in a dispute over the terms of a real estate contract the Milwaukee, WI real estate litigation attorneys at Gimbel, Reilly, Guerin & Brown, LLP can provide you with the representation you need and help you reach a positive outcome to your case. Contact our offices at 414-271-1440.

Sources:

https://scholar.google.com/scholar_case?case=2934903980949934351&hl=en&as_sdt=6&as_vis=1&oi=scholarr

https://magazine.realtor/law-and-ethics/law/article/2000/03/top-10-legal-issues-facing-brokers

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