Home Buying in 03226>Question Details

Michael Aron…, Real Estate Pro in 03809

Material misrepresentation of square footage

Asked by Michael Aronson, 03809 Mon Nov 10, 2008

If after you make an offer on a house that was accepted, you find that the above grade square footage was MATERIALLY misrepresented by both the seller's agent and the MLS listing ( by more than 20% above what actually exists ) what avenues and options of recourse are available?

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I had this problem with my home purchase. the house measured by appraiser 500 sq ft less than the MLS.
The MLS stated the source came from tax record, but the county tax record showing different number.

The problem is the appraisal value is a bit higher than the purchase price. So I can't use my appraisal contingency to back out from the contract.

I'm now trying to pursue renegotiation route with the seller. My broker said I might loose the earnest money if I back out.
0 votes Thank Flag Link Thu Jul 8, 2010
My travels have continued in this regard, and yeah most realtors in the areas I'm looking in (suburbs surrounding Philadelphia, PA) overstate the sq. footage. The downside is that anyone with half-decent computer skills can get the actual sq. footage that's used for tax assessment purposes. THAT is the value they're supposed to be using, but many don't (they add in the size of the garage, basement, and other "non-habitable" areas). I don't know if it's laziness, dishonesty, etc. and everyone knows that you're not supposed to do it, but many do regardless, and pass the responsibility on to the owners (I got tired of hearing "I didn't realize the represented size of the house was off... I got the measurements from the owners."), which is bunk since the information is easily found.

On the upside, I've found that asking a realtor for their opinion on this practice is a great way to find yourself a good realtor who will work with your best interests in mind.
0 votes Thank Flag Link Wed Aug 12, 2009
It's been my experience, based on statements by contractors, realtors, appraisers and legal interpretation of building restrictions (unless other specific language specifies otherwise) that a home (buldings square footage is that of the outside circumferance all above-grade floors of the building less the square footage of the garage and any unfinished areas . My experience has been that some (way too many) realtors commonly use finished footage that is below grade (basement) which should not be included (I have yet to find a definitive answer whether it is acceptable to add "basement" square footage in a finished walk-out that is technically not below grade. So although there is a "generally accepted" definition of what constitutes accepted square footage calculation; there is a lot of fudge room in what should be included as there seems to be some argument of what spaces get included or excluded.
Having had a few months to reflect on this I would have to say errors in square footage is more than excusable puffery and as I said before it could be actionable, but it's a pain to persue legally and the "reward"can be minimal. (please review the caveats in my previous post)
For those buyers for whom exact square footage is important, I would suggest you invest in a $30 laser measuring tool.
0 votes Thank Flag Link Wed Jul 29, 2009
We are 1st time home buyers in PA and we put an offer on a house listed at 1900 sq ft. After doing some calculations we found that it was at best 1390 sq ft and we were generous with our guestimates of the bathrooms and hallways. After looking into this more, it seems that all homes I've checked so far in our area are approx. 500 sq ft lower than being listed. How can this be???? The sellers agent says when they measure the circumference it comes to 1900. But you can't tell me that 500 ft is floating between the drywall! Any help is appreciated!
0 votes Thank Flag Link Wed Jul 29, 2009
Material Representation exists!!!
0 votes Thank Flag Link Tue Jun 30, 2009
I'm late to the party here, but I've been running into the same situation as the OP, Michael. Thankfully, I'm not in a situation where I was under contract or agreement, but I've been walking away from the majority of houses I've seen in my area because of this.

Here's a little bit of common sense and math put together. If the sq. ft. value is more than 10% of a difference between what you can measure inside the house vs. outside the house, then you want to be wary. If it's more than 20%, then someone is either incompetent or dishonest (especially with a new construction). Unless it's a secured building for the DoD, etc. you're not going to have that kind of discrepancy.

As far as the comment regarding perception of square footage goes, you're right. However, realtors fall under this as well, more so than most in my travels so far (particularly on the seller's end). I've found my latest house hunting expeditions to be an interesting application of my Engineering and Architecture background when listening to them explain how a 3200 sq.ft. house magically turns into 1800 sq. ft. of living area.

In a buyer's market, I've toured less than 10 houses and I'm now to the point where if the realtor hasn't previewed the house, I'm not even interesting in looking at the MLS. There's enough to deal with these days without having to deal with blatant misrepresentation.
0 votes Thank Flag Link Sun Jun 7, 2009
Long term return on investment Dane. Bottom line, a person buying a home with his or her head, not as an emotional reaction, will sit down and do a dollars per square foot calculation. especially when comparing two properties, or, in deciding between a standing structure or a new build. Comes time to sell .. will my comps be 2900 sqft homes, or, 3500 sqft homes? .. It'll make a difference in the price .. don't you think?

Head versus heart aside, as the selling agent's entire pitch was based upon cost or, value per square foot, that put square footage at the heart of the value computation .. and, on HIS selling basis .. if SqFt changes, so does value .. Whether I like the house or not is subjective .. long term profitability .. more a matter of numbers .. Make any sense to you?
0 votes Thank Flag Link Wed Nov 12, 2008
Hi Michael,
You liked the house well enough--after walking through it--to make the offer you did.
I am sure you can recind your offer, but are you actually unhappy with the home, or do you feel you are being overcharged.

Many people have no concept of square footage. But when they like a house they buy it.
If the home right for you and your family--and is worth the money you offered--what's the issue?

Dane Hahn
0 votes Thank Flag Link Wed Nov 12, 2008
Michael,

The reason I asked about "material" is to see if this was a specific term of action available in your jurisdiction. If so I am unfamiliar with it.

"Material" in contract law is one that is substantial and important. As you can appreciate, these are subjective terms and the outcome of a claim would depend on all of the facts and circumstances attendant to the transaction.

The common actions in contract law are "neglegent misrepresentation" and "fraudulent misrepresentation."
To prevail on either one there are certain elements that must exist or be proven.

Negligent has fewer elements to prove and they are less stringent (easier to meet.)

The big difference between the two is in the remedy available. Basically, Fraud=$.

The big problem is that in many jurisdictions "caveat emptor is applicable to real estate transactions relative to conditions open to observation. Accordingly, in cases where a condition is discoverable and the purchaser has an unhampered opportunity to investigate but fails to do so, he has no cause of action for misrepresentations or misstatements by a vendor, unless the vendor's actions or omissions amount to fraud," and fraud is hard to proove.

As you have not closed, but are under contract, I suggest you stop and take inventory of your situation. Talk to an attorney as you may have a good case to break the contract and walk away. But is that what you want? An attorney could advise you as to whether you have a stonger case that would alow you to do some arm twisting and get a better deal, or if all you have is the right to break the contract and either renogotiate or walk, or that you are stuck. As I said this is a subjective area and an attorney is unlikely to be able to give you no more than what your chances are at prevailing (no guarantees) and what legal costs are likely to be incurred to pursue your chosen remedy. The hard choice will be yours.
0 votes Thank Flag Link Tue Nov 11, 2008
In answer to Realtynovice's questions, yes, I walked the house, and as it did not "feel" like 3500 square feet, despite the seller's agent's continuously basing his " value of the property on a square feet / dollar, 3500 square foot house" I dug deeper.

As to why I use the phrase "Material Misrepresentation" .. I blame the dictionary.

material misrepresentation - Definition

Deliberate hiding or falsification of a material fact which, if known to the other party, could have aborted, or significantly altered the basis of, a contract, deal, or transaction.

Hiding the fact that a property is fewer square feet than you are pitching, constitutes hiding or falsification of a material fact if value per square foot is he basis of your valuation argument.. Well, that or BLATANT incompetence...
0 votes Thank Flag Link Mon Nov 10, 2008
Michael,

Did you walk the house?
You refer to this as a "material" misrepresentation. Why do you use this term? As that is important to any remedy that might be available.
0 votes Thank Flag Link Mon Nov 10, 2008
Alright then, was your offer contingent upon viewing the plans and specs? If so-great, no problem. If not, again once sq ft is determined, have your agent renegotiate your offer. After all their job is to look out for your best interests. Good luck!
0 votes Thank Flag Link Mon Nov 10, 2008
They "weren't available" until after an offer was on the table.
0 votes Thank Flag Link Mon Nov 10, 2008
Hi Michael, Sorry for the confusion, your profile says Real Estate Professional, so I just assumed.....as the saying goes-that's what I get for assuming. Anyway-with this new information and being a new build - once the square footage is verified, I would definetly have your buyer agent renegotiate the offer price. I am curious about one thing-did you and your agent review the plans and specs before submitting your offer?
0 votes Thank Flag Link Mon Nov 10, 2008
Thank you all for your answers up to this point. For clarification of a question that Lori asked, in this case, I am the buyer, not one of the agents,. I wear many hats in the housing industry, but, Realtor is not one of them. And, yes .. I am quite concerned about the total sqft. in part based upon available living space, in part, the selling agent's primary pitch ( cost per sqft being blow $100/SqFt once land value was backed out, and not a great deal more, even including land. ..

As to Gene's question - Some post offer due diligence revealed that this home was based on the http://www.frankbetz.com Dalrymple plan which maxes out at 2747SqFt, including the finished Bonus room. There is no finished basement space, nor, any attic space. Granted, there have been a few liberties taken with the basic plan, but the footprint has as far as I can tell, not been altered. That makes it rather difficult to squeeze 3500 SqFt into an under 2800 SqFt shell.

I am endeavoring to arrange for an impartial third party remeasure, to see what the numbers might actually be, then, make decisions going forward from there.

My initial question though, was based upon the assumption of verified material misrepresentation, not backed up by an error on the tax card. ( sloppy I can sort of forgive, crooked .. not so much )

This is a new build, no un-permitted remods involved.

Surprisingly, my buyer's agent did not pull the tax card early in the curve, and it should be showing up soon so that we may determine if the town's measurements might be in error, or, the seller's agent's.

Scott suggested a price adjustment based upon discovered actual SQFT ..

In this case: ( ACTUAL SqFt to be determined )

Seller / Seller's Agent says 3500 SqFt. 3500sqft @ $390k = $111.43 / SqFt .. The plans say 2747 SqFt, so, at $111.43 / SqFt That's $306,098.21 .. Hmm .. a bit of a spread ..

Were you folks the buyer .. where would YOU go with this situation .. Were you the buyer's agent? .. The seller or the seller's agent??

The more input I get on this the better .. Thank you all in advance for any input you might be willing to provide.
0 votes Thank Flag Link Mon Nov 10, 2008
Hello Michael- I don't have anything much more to add that hasn't been said, but this is something that I have much experience in and been on every side of with different deals and sales. If you had 7 people-
buyer
seller
buyer's agent
seller's agent
appraiser
town tax assesor
home builder

All measure the SF-GLA of a home, you will likely get 7 different answers and totals. Especially if it has SF added after the house was built, or up in an attic area, etc. The home builder (and most sellers) will use the SF based on the exterior of the walls to the exterior of the walls, even though officially that will be a little high as one cannot live within the wall space; that would not be "living area".
Thanks, and Good luck,
Ken L.
0 votes Thank Flag Link Mon Nov 10, 2008
Hi Michael,

Are you the buyer agent in this circumstance? If so, although the seller's agent misrepresented the square footage on the mls listing and is responsible for this, you as the buyer agent should have confirmed that the information was correct. Are your buyers overly concerned with this? Did they purchase the home due to the amount of square feet listed or because they love the house and it is spacious enough for their needs? Are there finished rooms that may not be showing on the tax card because the sellers did not pull permits to finish them? Sometimes actual square footage and what the tax assessors are taxing the home as, doesn't match. I would confront the list agent to see where the amount listed in the mls came from to see if there is a reasonable answer before looking for recourse. Good luck!
0 votes Thank Flag Link Mon Nov 10, 2008
Michael,

Before taking action or deciding to do anything be certain YOUR information is accurate. Since most agents take the homes square footage directly from the tax records, this could be a possible source of the problem.

Additionally, MLS information always comes with the clause attached, "Information deemed reliable but not guaranteed. Parties are advised to verify."

It may also be beneficial to have your agent explain how the square footage is calculated for: square footage under air, square footage, square footage, gross square footage, heated square footage.

Be sure you have all the information and that what you have is correct, before doing anything.

Good luck,
The Eckler Team
0 votes Thank Flag Link Mon Nov 10, 2008
you can ask to get out of it or have them lower the price by the aprice per squar foot the house is worth multiplied by how many miossing square feet there are. Did you match the mlos listiing with the tax card? if not contact the assessors office and request a copy of teh tax card which will have the layout of the house, dimensions and square footage. Your best bet is to seek an attorneys advise if you wish to seek legal remedies against either.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Mon Nov 10, 2008
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