There's really nothing for real estate agents and brokers to like about a recent case brought to our attention by the legal department of the National Association of Realtors® (NAR). Bowman v. Presley arose out of a 2005 transaction that took place in the state of Oklahoma. The ruling came down from the Oklahoma Supreme Court.

Michael and Heidi Presley listed their home for sale with Michael's mother, Linda Presley, a Realtor® with Century 21 Bob Crothers Realty. The listing price was $149,500. The MLS listing form showed the home to be 2890 square feet according to information that came from the tax assessor's records. The buyers, Richard and Dana Bowman, were looking for a home substantially larger than their then-residence of 1398 square feet. They made an offer on the Presley home and negotiated a purchase price of $145,000.

The sale closed and everything was fine until the buyers received a copy of the appraisal report which showed the house as 2187 square feet, a difference of 703 square feet. The buyers then obtained a copy of an appraisal by the same company who had appraised the house in 2000 when it had been purchased by Michael Presley. That appraisal also showed the house as being 2187 square feet. This being America in the 21st century, it is no surprise that a lawsuit was then filed. Even in Oklahoma. The buyers sued everyone for fraud and the licensees also for a violation of Oklahoma's Real Estate License Code.

At trial the defendants presented an interesting argument. The case should be dismissed because the buyers were not entitled to sue for fraud. An essential element of a fraud suit is that the plaintiff has been damaged. But the buyers had suffered no damage. They bought the property for $145,000, but the appraisal – the very appraisal they relied on for their claim – came in with a value of $146,697. It was worth more than they paid. So where was the damage?

The trial court agreed with the defendants and granted summary judgment (dismissal), and the court of appeal, where the case went next, agreed with the trial court. The Oklahoma Supreme Court, however, had a different take on things.

The Supreme Court opinion reads as follows: "The question of damages cannot be resolved based upon the estimations of value contained in the mortgage appraisal alone. An appraisal can give only an approximate value that is perceived by its author. Appraisals merely offer scenarios suggesting what a thing might be worth, not infallible indicia of fixed categorical worth. The precise value of the thing in litigation must be determined by the trier of fact. The jury is the sole and final arbiter."

Oh, please. The jury will determine the "precise value"? And what evidence will they use? Appraisals, of course. But who am I to question the court? Anyway, the case was sent back to trial in order for the material question of value to be resolved.

The Oklahoma Supreme Court also looked at the allegation that the Real Estate License Code had been violated. They noted that a license may be suspended or revoked for making substantial misrepresentations, and also that a licensee has a duty to "treat all parties with honesty and exercise reasonable skill and care." Moreover, "a licensee may incur liability for failure to uphold that duty when lay persons such as Buyers rely upon their representations made as licensed professionals.

In the court's view, saying the house was 2890 square feet was a substantial misrepresentation, one on which the buyers' relied. Whether that representation was made reasonably, recklessly, or with intentional dishonesty was something for a jury to decide. Hence the matter must go back to trial.

The agents indicated that the square footage figure was taken from the County Assessor's records. (This was not in dispute.) Moreover, the listing contained the common boilerplate that the "information was deemed reliable, but not guaranteed." The purchase contract contained common disclaimers that the sellers and brokers did not warrant the square footage. Still, the court saw the possibility that a license-suspending event had occurred.

No one said this would be easy, but come on. What is an agent supposed to do? Verify that the tax records are correct? But how would you do that? Have an appraiser measure the house, knowing that three other appraisers will arrive at three different figures? Then what? Maybe all those MLS fields that ask for factual descriptions (lot size, age, roof material, etc.) should have an option to enter "F". Which would mean, "find out for yourself."

Published: November 3, 2009

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Bob Hunt is a former director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .