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Read the full decision: Saffie v. Schmeling

A California court has evaluated allegations made by a buyer against a listing broker over statements made in the MLS that claimed a geologist had found the property “buildable.”

In 2006, Yousef Sasa (“Seller”) listed a property for sale with Robert Schmeling (“Listing Broker”).  The Listing Broker placed the property into a multiple listing service (“MLS”), and included the following description: “This property is in an earthquake study zone but has had a Fault Hazard Investigation completed and has been declared buildable by the investigating licensed geologist.  Report available for serious buyers” (“Report”). 

A geologist prepared the Report in 1982, and reached certain conclusions about the effect an earthquake would have on the property.  A letter  (“Letter”) from the local planning board acknowledged the Report complied with the standards required by local ordinance.  The Report did not specifically state that the property was “buildable.”

George Saffie, Jr. (“Buyer”) was interested in purchasing an undeveloped commercial parcel and so his representative made him aware of the Seller’s property, including showing him the MLS listing.  The Seller eventually accepted the Buyer’s offer to purchase the property. 

Prior to closing, the Listing Broker gave to the buyer’s representative a copy of the Report and the Letter.  The buyer’s representative then gave these documents to the Buyer.  Even though the buyer’s representative testified that he told the Buyer that he needed to “check out” the buildability of the property, the trial court found that the buyer’s representative had given the Buyer the impression that the property was ready for building.

Following the closing, the Buyer discovered that the property was not “ready to build.”  The 1994 Northridge earthquake had caused the county to change the earthquake zone requirements, and so the Report was out of date.  The new requirements for building made developing the property impractical for the Buyer.

The Buyer filed a lawsuit against the buyer’s representative, the Seller, and the Listing Broker.  The trial court found the buyer’s representative liable, and awarded the Buyer $232,147.50 in damages.  The trial court did not hold the Seller or the Listing Broker liable.  The Buyer appealed the ruling in favor of the Listing Broker.

The California Court of Appeal, Fourth District, affirmed the ruling of the trial court in favor of the Listing Broker. The Buyer alleged that the Listing Broker’s statements in the MLS were false or inaccurate; since it failed to clarify that the report was from 1982 and was out of date for purposes of development in 2006.  He based his argument on a California statute that specifies the duties of a real estate professional for MLS postings.

California has a statute that specifies the responsibilities of a broker when posting information to a MLS.  The California statute states that the broker is responsible for the truth of all statements that the licensee “had knowledge or reasonably should have had knowledge” made in the listing and provides a statutory negligence penalty for anyone injured by the falseness or inaccuracy of the statements.  The Buyer did not challenge the accuracy of the statements made by the Listing Broker in the MLS, but rather argued that these statements caused him harm and so violated the California statute.

The court rejected the Buyer’s argument, finding that the Buyer had failed to allege that there was anything false or inaccurate about the statements made by the Listing Broker in the MLS.  The Listing Broker’s MLS listing stated that there was a Report that had met the requirements at the time for developing a property.  The court found that it is not the duty of a licensee to correct individuals who may have misconstrued his/her true statements in a listing or assure that a buyer performs proper due diligence before closing a transaction.  Further, the court ruled that by delivering the Report to the Buyer and his representative, the Listing Broker further satisfied the Listing Broker’s duty of disclosure to the Buyer.  Because the Listing Broker’s statements in the MLS were true, the court affirmed the lower court ruling in favor of the Listing Broker.

Saffie v. Schmeling, 168 Cal. Rptr. 3d 766 (Cal. Ct. App. 2014).