The Southern District of New York reminded purchasers of real estate in Coppelson v. Serhant that real estate agents are, in fact, trying to sell real estate so they can earn a commission and will make statements to buyers intended to accomplish that goal.
The plaintiffs, purchasers of an investment property in Manhattan, complained that Ryan Serhant misrepresented that the property would be worth over $5M in a short period of time and that that it was priced 20% lower than comparable properties. The court, in dismissing the case, reminded buyers that they can, and must, perform their own due diligence because sellers of real estate will always talk up how great their property is and because "few sellers will state that the property is priced at an unfavorable level and that it will decrease in value or has no real investment potential." This conclusion is obvious - brokers will engage in puffery to sell real estate and earn a commission, and the courts won't protect your naivete. Whether that is good for business or good for building relationships of trust is another question for another day.
Another important takeaway from this case is the reminder that a broker's failure to follow the requirements of RPL §443 (e.g. improperly filling out an agency disclosure form) is not the basis for a lawsuit. This is something I encounter nearly every day - buyers discovering something unpleasant about their property after they close and then suing the broker for not telling them about it and for not disclosing that they represented the seller too ("the broker didn't tell me about the oil leak in the basement because they wanted their commission!"). Often there is not actually a dual agency relationship because it is perfectly fine for a broker to only represent the seller with the buyer remaining unrepresented, but many buyers believe the listing broker they met at the open house or showing represents their interests too (hence the intended purpose of the RPL §443 agency disclosure requirement). Regardless, the sole remedy for agency disclosure violations is regulatory action by the Department of State, not a lawsuit.
All of this begs the question, is the current state of regulatory enforcement sufficient to protect consumers from what they perceive as wrongful salesmanship and flat-out incorrect agency disclosures? If not, what would you change?
