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Sherman v. Elkowitz: the Seller’s Disclosure Notice and the Agent’s Duty to Disclose

Sherman v. Elkowitz: the Seller’s Disclosure Notice and the Agent’s Duty to Disclose. August 2006 Legal Presentation. Sherman v. Elkowitz Houston - 2004. Background: Listing agent, Elkowitz (ReMax), assisted Sellers with preparation of Sellers Disclosure Notice

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Sherman v. Elkowitz: the Seller’s Disclosure Notice and the Agent’s Duty to Disclose

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  1. Sherman v. Elkowitz:the Seller’s Disclosure Notice and the Agent’s Duty to Disclose August 2006 Legal Presentation

  2. Sherman v. ElkowitzHouston - 2004 • Background: • Listing agent, Elkowitz (ReMax), assisted Sellers with preparation of Sellers Disclosure Notice • After moving in, Buyers found defects that had not been disclosed • Sellers had sued the previous owners for some of these same defects

  3. Procedural History • Trial Court granted directed verdict in favor of Elkowitz and ReMax • Jury returned a judgment against the Sellers • Buyers appealed the directed verdict – issues for appeal: • Are Elkowitz/ReMax liable for misrepresenting the property via the SDN? • Are Elkowitz/ReMax liable for failing to disclose the Sellers’ prior lawsuit?

  4. Are Elkowitz/ReMax liable for misrepresenting the property via the SDN? • Buyers argued that Brokers adopt the representations of the Sellers in the SDN. • Court relied on 2 notices in SDN that it is a disclosure by seller only. • Only representation broker makes is that the broker “has no reason to believe SDN to be false or inaccurate.”

  5. Rule • The only way a broker could be held liable is if the Broker had reason to believe that the Sellers’ statements in the SDN were untrue, and if those statements were shown to be false. • If we have independent knowledge about defects in a property, we must make sure the Seller has properly disclosed them on the SDN.

  6. Are Elkowitz/ReMax liable for failing to disclose the Sellers’ prior lawsuit? • Evidence showed that Elkowitz knew of the existence of prior lawsuit, but did not know the specifics of the lawsuit. • Elkowitz’ knowledge of the prior lawsuit does not equate to knowledge of current defects in the home. • Law: “Repairs correct defects, not prove their continued existence.”

  7. Should the prior lawsuit have been disclosed in the SDN? • Rule: The SDN requires disclosure only of pending lawsuits. • The SDN seeks current information. “This notice is a disclosure of seller’s knowledge of the condition of the property as of the date signed by seller.” • Exceptions: • Previous Flooding into the Structures • Previous Flooding onto the Property • Previous Fires • Previous Foundation Repair • Previous Roof Repairs • Other Structural Repairs • Previous Treatment for termites or WDI • Previous Termite or WDI damage repaired

  8. Was Elkowitz negligent in telling Seller not to disclose the earlier lawsuit, without knowing the details of the lawsuit? • No. Real estate agent has not duty to inspect listed property and disclose all facts which might materially affect is value or desirability.

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