Recent Broker Cases

As usual, there are some good news and bad news cases to report. Here’s a review of a few recent cases.

Bad News for Beaumont Agent: Breach of Fiduciary Duty and Failure to Disclose
A Jefferson County jury recently returned a verdict for a homebuyer and awarded her just under $200,000 arising from her buyer agent’s improper acts in connection with her purchase of a house.

The homebuyer, represented by the defendant agent, claimed that after she closed on the house, she discovered it was infested with termites. She was unable to move in because the walls and attic were caving in due to termite damage.

Homebuyer claimed, and the jury found, that the buyer’s agent received a termite report identifying active infestation of termites, but never disclosed this information to her. In addition, the buyer’s agent signed the homebuyer’s name to a contract amendment without her permission. The amendment mentioned termites for a price reduction but was never seen by the buyer.

Predictably, the buyer’s real estate expert and even the agent’s sponsoring broker testified that it is improper for a real estate agent to sign the name of the buyer and that the agent had the duty to ensure the buyer understood the termite problem by giving her a copy of the report.

BOOM. Case Closed!

It should be easy enough for all brokers/agents to avoid this kind of conduct and result.

Commission Dispute: Broker Loses
A case out of Dallas from last summer reinforces the importance of a written commission agreement.

In this case, the broker filed suit against a developer and its general partner for their failure to pay the broker his claimed interest in profits from sale of the development. Apparently, the broker initially expected to be paid a $50,000 commission when he brought the land purchase to the developer, but before the contract was signed, he was asked if he wanted to be paid in cash or to “leave it in” the deal. Broker chose the latter, BUT never obtained a written agreement either for original commission or participation interest “in the deal.” When it came time to pay up, the developer declined to pay the broker and broker sued developer for breach of contract.

Trial court granted summary judgment for developer on basis that broker’s claim was, in fact, for recovery of a real estate commission and in the absence of a written commission agreement, statute of frauds negates broker’s right to recover. Dallas Court of Appeals agreed with the trial court’s ruling.

Lesson from this case: put your commission agreements in writing signed by the person charged to pay the commission.

Buyer Rep Agreement: Agent Wins!
Let’s close with some good news, at least for now.

A recent trial in Harris County Court at Law pitted a buyer’s agent against his clients for enforcement of their Buyer Representation Agreement. The agent maintained he had a contract with the buyer clients that gave him the exclusive right to show homes to them. The buyers were also shown homes by another broker and ultimately bought a home through the other broker. Agent sued the buyer clients for breach of contract.

Despite the buyer clients’ contention they had no contract with the agent (buyer rep agreement actually between agent’s broker and buyers), the jury found that the buyers breached the contract and awarded the agent $3,000 in damages and $9,600 in attorneys’ fees. The buyer clients have filed an appeal.

Many times brokers ask whether the buyer representation agreement is truly enforceable or even worthwhile. Based on this outcome, the answer is yes, definitely worthwhile, advisable, and enforceable.