Salesperson Not Imputed Local Knowledge

Read the full decision: Haynes v. Lunsford , No. E201501686COAR3CV, 2017 WL 446987

Tennessee court finds that a real estate professional properly conveyed all information that she had about a property to the buyers and there was no evidence that she knew that cabin had been abandoned for several years, which the buyer claimed was common knowledge in the community.

A married couple (“Buyers”) contacted a real estate licensee (“Buyer’s Representative”) to find a home for the wife, as the couple was about to undergo a divorce. The Buyer’s Representative located several properties, including a property (“Cabin”) that she found in a local multiple listing service. The listing suggested that the Cabin was recently built but the Cabin was currently owned by a bank that had received the property through a foreclosure in 2006 and the cabin was built in the 1960s.

The Buyers visited the Cabin and eventually entered into a contract with the bank to purchase the Cabin. During the visit, one of the Buyers commented that the Cabin “smelled great.” The Buyers ordered an inspection of the Cabin, and the inspection report noted deterioration at the log joints but the report did not find any mold intrusion issues.

The Buyers began noticing a “mildew-type odor” five months after taking possession of the property. The Buyers had two inspectors visit the Cabin, and they discovered moisture issues in the walls and found mold spores inside the Cabin. The inspectors also found that the Cabin suffered from long-term water intrusion.

The Buyers filed a lawsuit against the seller and the Buyer’s Representative, alleging misrepresentation of the property’s condition and violations of the state’s consumer protection act. The trial court granted judgment for the Buyer’s Representative, and the Buyers appealed that ruling.

The Court of Appeals of Tennessee, Knoxville Division, affirmed the trial court. In their lawsuit, the Buyers alleged that it was common knowledge in the community that the Cabin had been abandoned for many years. The Buyers provided testimony that that the Cabin had gone through a period where it had no windows, door, roof or a deck and had also slid off the foundation several times. The Buyers also claimed that they should have been made aware that the property had been acquired by the bank through foreclosure and the Buyer’s Representative knew that the property was not “new”, as had been represented to them through the MLS listing.

The court found that the Buyer’s Representative had conveyed to the Buyers all information that she had about the Cabin. The Buyer’s Representative testified that she had an impression from her visit that the property was new, but she later learned from the seller’s warranty deed that the seller was a bank, which suggested a foreclosure. But the warranty deed as well as all of the other information that the Buyer’s Representative received (MLS listing, inspection, and the seller’s property condition disclosure form) was all made available to the Buyers.

There was also no evidence that the Buyer’s Representative was aware of the mold on the property or that she knew the property had been abandoned for a period of time. The court declined to impute the alleged local knowledge of the Cabin’s condition to the Buyer’s Representative, as the Buyer’s Representative did not have a duty to investigate the history of the property. The court ruled that the Buyer’s Representative had met her disclosure obligations and so affirmed the trial court.

Haynes v. Lunsford , No. E201501686COAR3CV, 2017 WL 446987 (Tenn. Ct. App. Feb. 2, 2017). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].

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