We all hear it constantly -- the "M" word! Real estate agents seem to relish using the word "misrepresentation," and one can hear it almost anytime agents are talking among themselves. The word "misrepresentation" has become almost generic, and is used to describe almost anything the other agent did, that you didn't approve of. However, it must be borne in mind that the term "misrepresentation" is a legal "term of art" and has a very specific definition. In fact, to make an allegation of misrepresentation stick in court, the Plaintiff must plead and prove no less than nine separate elements of the "offense". In most states, the burden (amount) of proof for a Plaintiff claiming fraudulent misrepresentation in court is more strict than for any other type of claim.

Traditionally, misrepresentation involved what may be referred to as the garden variety, outright lie. However, there are a number of other circumstances in which a misrepresentation can be made, which are not so blatant as the outright lie. For example, a misrepresentation can be made negligently. That is, an agent can make a statement he/she believes is true, but the agent has not verified the information first, and happens to be wrong. Because there is a legal duty to provide reliable information to a client, the agent is guilty of negligent misrepresentation. To quote a recent Court decision, "When a broker speaks, he has a duty to provide reliable information."

One can also make a misrepresentation by omission, by failing to disclose a material fact when there is a duty to disclose that fact. The failure of the licensee to fulfill the duty to disclose the material fact is treated by the law the same as if an intentional misrepresentation of material fact had been made. Similarly, one can make a misrepresentation by stating something that may technically be true, but which is said in a way which is false or misleading.

Unfortunately, many agents seem to believe they must be omniscient -- all knowing -- in every transaction. They are terrified to utter those three little words, "I don't know." Thus, they allow their highest-liability items -- their mouth -- to get other parts of their anatomy in trouble! No matter your I.Q., no matter how worldly-wise you may be, no agent can answer every question correctly, nor should you try. I am here to tell you that it is O.K. to say, "I don't know." You will never be sued for saying "I don't know."

I will now share with you the very essence of the Art of Avoiding Misrepresentation. Please take careful notes, as this principle was divined as a result of my experience as an Administrative Law Judge, who has performed hundreds of "license-ectomies." The best way to avoid making a misrepresentation is to make no representations at all!

Allow me to demonstrate this Principle in practice:

Q: Is this house on sewer, or on a septic system?

A: I think it is on sewer, because the seller told me so. However, there is only one way to find out for sure, and that is to have a "dye test" performed. Let’s have a licensed plumber come out to perform a dye test; that way, you’ll know for sure. I’m sure it won’t cost you much.

Q: Under what circumstances could the lender call this loan immediately due and payable?

A:Well, of course, I'm not a lender, but I'm sure that your loan officer, Susan, would be happy to explain this to you. Let’s make an appointment for you to talk to her.

With practice, you can learn to easily avoid answering almost any question! (Added bonus: this will qualify you to run for public office!) If the party you are dealing with doesn't take your advice to seek professional consultation, be sure to make a note of that fact in your file. For example, "3/27/95 -- Buyer asked about 100% copper wiring; recommended that she hire electrician to verify; she doesn't want to spend the money." This type of "business record" in your file can go a long way toward insulating you from liability. You could even send a brief letter to the clients, confirming that you have advised them to have a professional answer their question, and reminding them that, if they don’t follow your advice, they run the risk of problems later.

Another way to avoid the need to make representations is to recommend a thorough home inspection by a licensed, bonded and insured home inspection service. In most areas, I would think that the standard of care requires that you advise the buyer to have an inspection. Even if you have to pay for it yourself, consider it an insurance policy to cover your peace of mind. Don't forget to recommend a home warranty! It is another form of inexpensive insurance for you.

And, hey! Let's be careful out there!