Buyer’s Broker Did Not Owe Seller a Duty to Advise Seller that Purchase Price of Unimproved Land Was Substantially Below Fair Market Value

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Clifford R. Horner, Esq.

Real estate brokers are subject to two sets of duties: those imposed by statutes and those imposed by common law duties. For example, such common law duties include a seller's *agent’s duty to disclose to the buyer “facts materially affecting the value or desirability of the property which are known or accessible only to him when such facts are not known to, or within the reach of the diligent attention and observation of the buyer.” A broker’s breach of his or her duties in a real estate transaction can subject them to liability.


In the recent case of California Court of Appeal case of Greif v. Sanin (2022) 74 Cal.App.5th 412, the Court of Appeal examined whether a buyer’s broker has a duty to inform the seller that the purchase price which the Seller agreed to accept is below the fair market value.


Summary:


In the case of Greif v. Sanin (2022) 74 Cal.App.5th 412, the seller, an elderly and infirm man, agreed to sell unimproved property in Riverside County for $330,000 when he thought he was selling the property for $3.3M. The seller’s expert opined that the fair market value (“FMV”) was $1.25M while the Buyer’s expert opined the FMV was approximately $800,000 and the Court held that the FMV was $600,000. Ultimately, despite the seller agreeing to sell the property for approximately ½ of the Court’s determination of the FMV, the Court held that it was inappropriate to place the burden on the buyer’s broker to inform the seller that the offered purchase price was below FMV, where the Seller had access to information relevant to the FMV, could research the FMV, and could retain a real estate agent to advise and assist him in determining the sales price, yet chose not to do so at his own peril.


The Court held that, “placing such a burden on the buyer's broker under these circumstances would wreak havoc on real estate transactions and client/agent relationships.” As such, the Court held that even where the seller is elderly and physically infirm, “public policy does not favor holding the buyer's agent responsible for informing the seller that the agreed upon purchase price is below FMV.” Rather, that is the responsibility of the seller's broker and, if the seller chooses not to retain a real estate agent or advisor, the seller is responsible for investigating the value of the Property and determining the sales price and the law generally assumes one has some knowledge of the value of that which he owns.


Take Away:


In the recent case of Greif v. Sanin (2022) 74 Cal.App.5th 412, the Court of Appeal held that a buyer’s broker did not owe a common law duty to inform the seller that the purchase price stated in the purchase agreement was below fair market value. To do so could in fact subject the Buyer’s broker to liability for breaching his duty to Buyer client. Additionally, a Seller of real estate who acts to sell his property without the advice and guidance of a licensed real estate broker does so at his own risk with respect to certain aspects of the transaction including the price agreed upon. A broker dealing with a party not represented by a broker in a transaction should give appropriate agency disclosures to also mitigate any claim by the unrepresented party that the broker in fact represents them, as was one argument in the Grief case.


By: Clifford R. Horner, Esq.

Paymon P. Hifai, Esq.

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