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Law School Case Brief

Holmes v. Summer - 188 Cal. App. 4th 1510, 116 Cal. Rptr. 3d 419 (2010)

Rule:

Where a seller of real estate knows of facts materially affecting the value or desirability of the property which are known or accessible only to him and also knows that such facts are not known to, or within the reach of the diligent attention and observation of the buyer, the seller is under a duty to disclose them to the buyer. When the seller's real estate agent or broker is also aware of such facts, he or she is under the same duty of disclosure. A real estate agent or broker may be liable for mere nondisclosure since his or her conduct in the transaction amounts to a representation of the nonexistence of the facts which he has failed to disclose.

Facts:

After the buyers made an offer on a residence, the brokers prepared a counteroffer on the seller's behalf without disclosing to the buyers that the existing debt on the property far exceeded the purchase price. The buyers alleged that they sold their existing home in order to purchase the seller's property before learning that the seller could not convey clear title. The trial court ruled that the brokers had breached no duty to the buyers.

Issue:

Did the trial court err in holding that the brokers had breached no duty to the buyers?

Answer:

Yes

Conclusion:

The court stated that although a seller's agent did not generally owe a fiduciary duty to a buyer, a seller's agent nonetheless owed the buyer the affirmative duties of care, honesty, good faith, fair dealing, and disclosure, as reflected in Civ. Code, § 2079.16, as well as such other nonfiduciary duties as were otherwise imposed by law. The court concluded that when a real estate agent or broker was aware of monetary liens and encumbrances exceeding the sales price of a residential property, so as to require either the cooperation of the lender in a short sale or the ability of the seller to put a substantial amount of cash into the escrow to obtain their release, the agent or broker had a duty to disclose this state of affairs to a buyer.

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