I just found this. Might be of interest to some of you if ever in this situation.
ERRORS & OMISSIONS CLAIMS STUDIES Claim Study 1: Square Footage Discrepancy Facts:
Prior to marketing the subject property, the listing agent drew a floor plan of the house showing 3,500 square feet. The seller believed the home had 4,000 square feet and wanted the listing agent to list the home as having 4,000 square feet. In an apparent compromise, the listing agent then advertised the house as having 3,750 square feet.
The buyer made an offer on the home. The purchase agreement contained standard language that the buyer was not relying on any agents’ representation of square footage. After the purchase agreement was signed, but before closing, the listing agent gave the buyer’s agent a copy of the drawing that showed 3,500 square feet. However, there was nothing in writing to confirm whether the drawing was ever provided to the buyer.
After closing the buyer had the carpet cleaned, at which time he discovered the home had less square footage than advertised. The buyer hired an engineer to measure the square footage. The engineer determined the house only had 2,750 square feet, 1,000 less than the advertised square footage, because he did not include an unheated addition in his calculation. If the unheated addition was included, the property would be 3,400 square feet, almost the amount shown by the listing agent’s floor plan but still 350 square feet less than the advertised amount.
The buyer sued the sellers, the selling agent, and the listing agent for misrepresenting the square footage and miscellaneous minor issues with the electrical and heating systems. The buyer claimed to be entitled to damages in excess of $100,000, based on the difference in value of 1,000 square feet (the 3,750 advertised versus the 2,750 measured by the engineer), and sought punitive damages.
Result:
While this was not a Louisiana claim, square footage discrepancies are fairly common in all of the states where RISC handles policies. In this case, the listing agent’s carrier paid $39,000 to settle the case prior to trial and more than $50,000 in legal expenses.
Suggested Approach:
The listing agent realized there was a discrepancy in the square footage measurement prior to listing the property and prior to closing but did not investigate the discrepancy or expressly disclose the discrepancy to the buyer or buyer’s agent. The listing agent should not have listed the home as having more square footage than her measurements revealed. Further, the claim may have been avoided if the listing agent had the buyer sign a separate document that specifically disclosed the discrepancy in the square footage, provided that the buyer was not relying on the listing agent’s representations, and recommended that the buyer retain a professional to measure the square footage.
Nothing herein should be construed as legal advice or advice regarding any applicable standard of care.
