Transaction Broker Lawsuit Continues

Read the full decision: RZI v. S. REO Properties, LLC, 782 S.E.2d 731 (Ga. Ct. App. 2016)

A Georgia appellate court has considered whether a transaction broker exercised sufficient care in notifying the buyer about the seller’s deadlines for submitting financial information.

RZI Properties, LLC (“Buyer”) sought to purchase a parcel of land owned by SunTrust Mortgage (“Seller”) contiguous to three other lots already owned by the Buyer.  The Buyer contacted a real estate brokerage firm (“Broker”), seeking to have the firm arrange the transaction.  The Buyer entered into an oral agreement with the Broker where the Broker would receive a flat fee and would only be responsible for performing the tasks related to closing the transaction.  Specifically, the Buyer wanted the Broker to provide notice of all the necessary paperwork requested by the Seller and alert the Buyer about any communications from the Seller.

In early January 2012, the Buyer submitted an offer for the parcel.  The Seller sent the Broker a list of documents required to complete the transaction, and the Broker forwarded the message to the Buyer stating that there was an accepted contract once the Seller received the earnest money.  The Buyer provided all of the information requested and sent the earnest money to the Broker, except that the “proof of funds” document submitted was more than 30 days old. 

On January 12th, the Seller rejected the contract because the proof of funds was not up-to-date.  The Seller’s representative told the Broker that she needed an updated proof of funds that day.  The Broker forwarded the message to the Buyer, and the Buyer testified that the message was not received until the next day.  The Buyer was surprised to learn that there was not a contract because the Broker had said that the offer had been accepted by the Seller.  The Buyer told the Broker that it could provide the proof of funds on January 17th (the 16th was a bank holiday).

On January 17th, the Seller’s representative told the Broker that proof of funds must be received that day or the Seller would move on.  The Broker responded that the Buyer could not provide a proof of funds until the next day, and the Seller’s representative told the Broker that the deal was off.  Later that morning, the Buyer testified that he faxed the Broker proof of funds but did not learn of the earlier communications until the end of the day.

On January 18th, the Broker submitted a new offer from the Buyer to purchase the parcel with the updated proof of funds.  On January 19th, the Seller’s representative told the Broker that the Seller had already accepted another offer for the property.

The Buyer brought a lawsuit against the Brokerage for breaching its duty of reasonable care by failing to provide the Buyer timely information in order to complete the purchase of the parcel.  The trial court entered judgment in favor of the Broker, and the Buyer appealed.

The Court of Appeals of Georgia reversed the trial court, finding that there were issues of fact as to whether the Broker exercised a reasonable duty of care in notifying the Seller about the deadlines for the transaction.  Georgia license law provides when there is no written representation agreement between the parties, the real estate professional is a transaction broker.  The duties that a transaction broker owes to his/her client are limited to those found in the statute, and the statute provides that the real estate professional does not owe a client a fiduciary duty and only owes a duty of reasonable care while performing ministerial acts in a real estate transaction.

Since there was no written agreement between the parties, the Broker served as a transaction broker.  “Ministerial acts” are defined in the state’s license law as those that do not require the real estate professional to exercise professional judgment.  The statute includes a list of mandatory duties, and also lists other typical duties but states that the duties are not limited to the list. 

While not set forth in the statute as a ministerial act, the Buyer argued that the Broker failed to communicate information in a timely manner about the need to submit an up-to-date proof of funds to the Seller.  Based on the evidence, there was a factual dispute as to whether the Broker had properly communicated the Seller’s deadline to the Buyer.  Therefore, the court sent the case back to the lower court to conduct proceedings to resolve this factual dispute in order to determine whether the Broker had breached the duty of reasonable care.

RZI v. S. REO Properties, LLC, 782 S.E.2d 731 (Ga. Ct. App. 2016).

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