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This may make for an interesting discussion. It was posted on another site.
It involves the state of Massachusetts.
A real estate agent is representing a buyer, who is a US medical student from an Asian country. The offer was accepted, and later P&S (purchase/sale agreement) was signed by both parties, but the buyer cancelled the purchase without paying the deposit. The buyer found a city cemetery site near the property after P&S was signed. The seller sued the buyer for not paying the deposit, buyer's attorney suggested the buyer to settle the case as the buyer will likely lose the case in court.
Now the buyer, and his attorney, is asking damages compensation from the buyer's agent for the reason the cemetery was not found by the agent earlier. How likely the agent will lose the case if the case goes to the court?
Additional facts:
1) The buyer never told the agent about his religion or opinion about any cemetery before P&S signed, but the agent admitted that he knows some Asian doesn't want to live "directly" adjacent to cemetery, or visible to it;
2) The city cemetery is not directly adjacent to the condo building, instead, there are another large residential buildings (10 floor high and 150 yard long) between this property and the cemetery, the cemetery is not visible from the street as there are high walls blocking the view from the street. People cannot see the cemetery due to the distance (300~ yard), and blocking buildings and walls.
3) this is 150 year old historical cemetery site and there has been no burial in recent 150 years.
There is a very high deductible on the Professional Liability policy.
My response:
Unless it's for a few thousand in "go-away" money, my opinion, for the two cents that it is worth, is that it is worth it for the agent to consider the option (if he has it) to refuse any settlement and insist that his E&O carrier deny the claim and provide a defense.
Two reasons:
1 - I don't believe the agent had any duty to investigate the presence of nearby cemetaries unless the buyer specifically asked him to, regardless of what he thought he knew about Asians.
2 - Massachusetts has an interesting statute which I will quote in its entirety:
Section 114: Real estate transactions; disclosure; psychologically impacted property
The fact or suspicion that real property may be or is psychologically impacted shall not be deemed to be a material fact required to be disclosed in a real estate transaction. ''Psychologically impacted'' shall mean an impact being the result of facts or suspicions including, but not limited to, the following:
(a) that an occupant of real property is now or has been suspected to be infected with the Human Immunodeficiency Virus or with Acquired Immune Deficiency Syndrome or any other disease which reasonable medical evidence suggests to be highly unlikely to be transmitted through the occupying of a dwelling;
(b) that the real property was the site of a felony, suicide or homicide; and
(c) that the real property has been the site of an alleged parapsychological or supernatural phenomenon.
No cause of action shall arise or be maintained against a seller or lessor of real property or a real estate broker or salesman, by statute or at common law, for failure to disclose to a buyer or tenant that the real property is or was psychologically impacted.
Notwithstanding the foregoing, the provisions of this section shall not authorize a seller, lessor or real estate broker or salesman to make a misrepresentation of fact or false statement.
I can't see how there is any legitimate case by any party in this transaction.
There is no duty on the part of an agent to disclose the existence of a cemetery, the existence of which is open and obvious by anyone doing any due diligence at all.
We are not only not required to disclose considerations (positive or negative) based on our own assumptions about the buyer's religion or race, we're prohibited from doing so.
I don't know about MA - but I can't imagine a buyer with opinions that are this picky about cemeteries not including contingencies that allowed for due diligence investigation of the property and neighborhood that would have allowed him to walk for this or any other reason.
In terms of this transaction, deposit of earnest money funds is usually due very early in the transaction, in our state usually within 2 days. I can't imagine either side should have suffered damages worth suing over for a transaction that fell apart within the first two days.
In a normal world, both buyer and seller dust themselves off, and resume their lives. The fact that this transaction led to litigation by either party indicates *to me* that someone believes someone else was acting in bad faith. Normal people in this situation don't don't sue over a transaction this inconsequential. Of course, for those who do... it's never about the money, it's about the principle.
I don't think the buyer has a case. The cemetery isn't on the property itself, and if there are cultural concerns then the buyer needs to make sure that they share those.
With google maps, the buyer should have looked it up before they made the offer if it was material to them. It isn't like it isn't obvious.
Interesting move by the seller. In MA, usually there are TWO earnest money deposits. The first (and typically smaller of the two--but not always "small") with the executed offer (contract) to purchase. The second (and typically larger--but again, can vary) with the signed P&S, which can be a few days/weeks later.
Sounds as though the seller already had the first one in hand, and the parties both signed the P&S agreeing to the second one, but the buyer didn't honor the contract.
If the buyer decided to fight it, it may have tied the property up, but since the attorney advised to settle, the seller can just move on to the next buyer with the money in hand. It could be a significant amount of money, which is why they are going after the agent.
The way the law is written it does sound as though the agent wouldn't be found responsible for damages, but does their admission of "knowing" about some Asian's preference bring fiduciary responsibility into question? Just wondering out loud...
The way the law is written it does sound as though the agent wouldn't be found responsible for damages, but does their admission of "knowing" about some Asian's preference bring fiduciary responsibility into question? Just wondering out loud...
I don't think so. Being near the cemetery is a Feng Shui thing. I have had buyers that purchase homes based on Feng Shui criteria and every single one of them has had to compromise because we do not build homes in the US based on Feng Shui. They have had to violate a principle to buy a home. I'm just clear when a buyer tells me that they are buying based on these principles that they will likely have to violate one of them so they just need to rank them in order of importance to them. What they rank as deal-breakers has varied by individual so I can't even say there was any commonality there.
If I were Asian, I don't know that I would want every real estate agent asking me if I wanted to buy based on Feng Shui. That seems like a stereotype to me.
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When I was a Realtor, I had a very nice young, Asian couple come to my office to look for a home. They did advise me that they did not want to see a home (I can't remember exactly which) if the sun set on the front of home in the evening or rose in the morning. I worked hard for them, but it's not something that was written in any listing I saw. To help them look for a possible home, I used Google Maps for aerial photos to determine where the home's front faced. Just sharing a similar story. I did work with them for at least a week but I think they ultimately found a home on their own that was a FSBO.
Jack, do you have a link to an article about this? I haven't heard about this case yet. I'd be curious to learn more details.
As an agent in MA, I can say we're required only to disclose material defects (ex. a hole in the roof, the basement takes on water, the window in the kitchen doesn't open, etc., etc., etc.). As you can see from the statute quoted by Jack, we're not required to disclose what would be considered a psychological or immaterial defect (ex. a sex offender lives in the neighborhood, there's a loud barking dog next door, the house is thought to be haunted, etc., etc., etc.). Some agents will go above and beyond what is required in terms of disclosure to insure a smooth transaction and the guard against a buyer backing out like this but it's not required and not everyone will and certainly I've never seen anyone highlight the presence of a cemetery in a listing.
As KJ said, escrow deposits in MA can be quite large. The initial deposit when your offer is accepted (depending on area of the state) often is $500-$1,000. During current market conditions, I've seen people offer a much higher initial deposit and a lot of my clients have been doing $10,000. Massachusetts is a two contract real estate process (although the 2nd contract, the Purchase and Sales Agreement, is not required) and a second deposit is typically paid at the signing of the second contract. Often, the second deposit brings the total escrow balance up to 5% of the purchase price although again in the current market some people are offering more and I've seen upwards of 10%-20% offered at the P&S signing.
Depending on where in Boston this condo is located it could easily be worth $1M or multiple millions. Even if we assume this is a $1M condo, that would mean the deposit the seller sued for would be $50K.
Quote:
Originally Posted by KJMoves
The way the law is written it does sound as though the agent wouldn't be found responsible for damages, but does their admission of "knowing" about some Asian's preference bring fiduciary responsibility into question? Just wondering out loud...
IMO (I'm not a lawyer nor do I play one on TV) this piece of information is irrelevant. It's just the admission of the agent subscribing to a stereotype. Unless the buyer specifically stated to the agent that they did not want to live near a cemetery then this agent has done nothing wrong.
In 15 years as an agent, I've seen tons of different reactions to cemeteries. I've had clients who don't care at all. I've had clients that don't want to be adjacent to them. I've had clients who don't want to be within X feet of one. I've even had clients who wouldn't buy a house if they had to regularly drive by a cemetery on their way to the house. I've found that "close" is a very relative term and it could mean anything from right next door to driving by it on a frequent basis.
Did this agent do a poor job? Absolutely! If you're not asking your clients about their preferences then you're not doing a good job representing them. How can you help someone accomplish their goals if you don't even know what they are?
Did this agent do a poor job? Absolutely! If you're not asking your clients about their preferences then you're not doing a good job representing them. How can you help someone accomplish their goals if you don't even know what they are?
As a buyer, can I think of EVERY situation that would be a deal breaker when I initially meet with a realtor? Probably not. Off the top of my head, being next to elementary schools, subdivision pools, commercial zoning, interstate highways, or landfills, etc.
Regarding cemeteries - I have a cousin who lives next to a small country cemetery. She always boasts her neighbors are the quietest. Plus she’s related to most of them.
As a buyer, can I think of EVERY situation that would be a deal breaker when I initially meet with a realtor? Probably not. Off the top of my head, being next to elementary schools, subdivision pools, commercial zoning, interstate highways, or landfills, etc.
Regarding cemeteries - I have a cousin who lives next to a small country cemetery. She always boasts her neighbors are the quietest. Plus she’s related to most of them.
Some of these are pretty universal like it's a bad idea to live near . .
-Railroad tracks
-Water towers
-Adjacent to a school
-Etc., etc., etc.
Cemeteries will definitely affect resale value when your adjacent to one but having one several hundred yards away like it is in this example where the buyer doesn't even know it's there when visiting the property is another story. That's something that's highly personal and I've had clients express those preferences to me because I tend to ask the right questions. Yes, as a buyer you're not necessarily going to remember to tell me every detail but it's my job to tease that info out of you so that you end up in the right house.
Thanks. My sense is the E&O company feels it's cheaper to settle than it is to mount a defense. However, unless the buyer expressly stated they don't want to live near a cemetery then the agent bears no liability for them backing out. Again, i'm not a lawyer nor do I play one on TV.
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