One of the first things people ask when they are interested in a home is “What’s the square footage?” One of the first things we ask buyers, once we know their price range is “what size home do you need?”. With few exceptions, people are able to immediately quote a size range in square feet. Square footage measurements make it easy to compare and sort one house against another and to decide, when searching, which homes to select initially as candidate properties, and which to exclude.
Many agents and buyers use the square footage size of the home to compare the price per square foot against the average price per square foot of homes sold in the particular neighborhood or area in which the home is located. Agents and Buyers use the square footage in this manner because no other characteristic of a house is as easy to understand, or as generally reliable to compare. Of course square foot size it is not and should not be the ONLY criteria used in valuing a home. There are many other factors to consider. But in Austin TX it is simply a fact that square footage size is a primary and common measure of value comparison used by agents, buyers and sellers when evaluating and comparing homes of similar size, quality and location and trying to determine what a fair offer or list price will be for a home.
So what happens when it is discovered after the fact that the square footage size of a home is substantially smaller than the number represented by the Seller? This just happened to one of my Buyers, prior to closing, and the outcome was that the deal fell apart, the Buyer may lose his Earnest Money, and the home will have to be returned to the market with the square footage amount corrected. The issue is a bit more complex than it first seems, and it’s one of those cases in life where, in my opinion, common sense and fairness collide with established law.
The Story
I’m scanning new listings one morning and I see one in a hot part of area SW in South Austin that raises my eyebrow. A newer 2100+ sqft single story 3/2/2 with 2 living areas plus a study listed for less than $220K in a neighborhood where few homes sell for less than $250,000 anymore. I immediately go preview the property and it looks good. A CMA (Comparative Market Analysis) reveals the home to be under-priced, as compared to other homes in this neighborhood that are single-story between 1900 and 2300 square feet (I usually go about 10% above and below the square foot size of the subject property when looking for suitable comparable sales). I matched one of my buyers to this home and we made an offer, based on the value reflected in the CMA, which was well over the list price. The offer submitted by my buyer was selected in favor of 4 other offers received by the seller.
Upon what did the Buyer rely in thinking the home was 2100+ square feet in size?
The listing stated that the home was 2100+ sqft and the source of the number shown in the listing was an appraisal. The Tax Records showed this home to be just below 1800 square feet in size, but the home felt bigger because of the layout, and the Seller provided the actual measurements sketch from his previous appraisal to validate the size at 2100+ sqft.
As Realtors, we are taught if there is a discrepancy in the Tax Record size and an appraiser’s square footage measurements, to always trust the appraisal. This is because the appraiser is a licensed professional who actually visited the home and measured according to industry guidelines. The Tax District does not perform this sort of measurement and they often guess, or use builder’s floor plans, or rough exterior dimensions.
It is reasonable to assume that the appraiser will produce a more accurate square footage measurement that the Taxing District. Secondary to that is that fact that this particular home has all of the areas one would normally find in a home of 2000 square feet and larger – the second living area and the 4th bedroom/study, with a big family room and kitchen. So, upon walk-through, one would not necessarily think that the house ‘feels’ smaller than the stated square footage. I certainly didn’t and neither did the listing agent, who is also very experienced.
When the Buyer’s appraisal was completed, it showed a smaller size – 358 square feet smaller – than the Seller’s appraisal measurement. Appraisal measurements for homes almost always differ by some amount from the square footage listed in the Property Tax Records, but a 20% difference is unusual and substantial. It is not a trivial amount. Now we had to wonder which appraiser to believe? The buyer’s appraisal was only 8 feet different than the Tax Records, so we started thinking it was now very possible the home square footage size was overstated in the listing.
In looking at and comparing the property dimension sketches of both appraisals, I could see that the discrepancy could be assigned to the measurement of the depth of the house. One appraiser had it at 51 feet deep, the other at 45 feet deep. So I went and personally measured the depth of the home and it was indeed 45 feet. The buyer’s appraisal and the tax records have it right – the home is less than 1800 square feet in size. A subsequent third appraiser was hired to go measure the home and he also came within less than 8 feet of the Tax Record amount.
The square footage of the home had been unintentionally misrepresented and overstated by 358 square feet (20%) to all prospective buyers via the information represented in the MLS listing and the seller’s appraisal diagram of the home.
So what’s the big deal, it’s only a number, right?
This misrepresentation resulted in inflated CMA analysis by me and no doubt other agents in helping our buyers determine competitive offer prices. A new CMA using the correct square footage results in a much different value. It comes in at $3,000 below the list price, whereas my original CMA showed the value substantially above the list price.
Since this buyer is an investor, I also ran a new leasing market CMA and concluded that homes smaller than 1800 square feet in this neighborhood rent for about $200/mo less than homes that are, on average, 350 square feet larger. This changes the financial equation for the buyer. The home is not what it first appeared to be from a financial investment standpoint.
So now what?
The over-stating of square footage size was pointed out and documented to the Seller. The buyer at first offered to pay the original full list price and go ahead and close (which was just a week away), but felt that the current contract price had been obtained as a result of an unfair market advantage enjoyed by the seller, due to the fact that all offers were calculated using an overstated square footage.
Since my buyer knew that he was not willing to pay the contract price, it was in fact the case that the Seller obtained a higher contract price than he would have otherwise, had the correct square footage been listed from the start. Since the Seller did not respond by acknowledging the mistake and offering to work toward a fair outcome, but instead basically said “buy it or lose your earnest money”, my buyer decided to walk away from the deal.
Unlike the Seller, my Buyer would never have had the advantage of advertising and marketing this home as a 2100+ square foot home. 2000 square feet is a hard cut-off or a “bright line” for many buyers and renters. Whether we like it or not, even though this particular home has a good layout and feels bigger than it is, it will never appear in MLS leasing or sales search results for people who desire a home 2000 square feet or larger. It won’t even appear in searches for homes 1800 square feet or larger. This could affect its future market value and the ability of the home to appreciate relative to the contract price.
What value did the home appraise for, and does that matter?
The home appraised for the full contract price, and yes it does matter. The legal wisdom in this situation says that the measurements don’t mean a thing if the home appraises for the contract price. As long as the home appraises for the contract price, the buyer has no argument and everything I have said above with regard to CMA’a, square footage preferences of buyers and renters, etc., means nothing. The argument is basically that the home itself has not changed. It’s still the same home, with the same rooms and walk-around space regardless of the measurements. The seller isn’t selling square footage; he is selling the home the argument goes.
I was told this by Texas Association of Realtors Attorney at the TAR legal hotline, with whom I discussed the matter two days ago. He says it is entirely the Buyer’s obligation to verify square footage, period. Case law mostly agrees. Unless there was intentional foul play, all of the consequences of this error fall on the Buyer, simply because the error was revealed after the Option Period expired, and because the home appraised for full value. If the buyer fails to close, he is in breach of the contract, according to real estate lawyers, and the seller could pursue remedies if he should so choose, including refusing to sign off on a return of the Earnest Money.
Attorneys Have it Wrong
If I may be so arrogant, the attorneys have it wrong. I would agree with the attorneys if we were talking about a 50 or 100 square foot difference of 5% or even 10% of total size, but this is a 358 square foot mistake that amounts to more than 20% of the size of the home. That, in my mind, is a substantial and material misrepresentation of size and it puts the matter into a different class of discrepancy.
Additional, I would argue that placing the tuning point upon the appraisal alone ignores that fact that the appraisal is itself influenced by the contract price, and therefore it can arguably be said that the appraisal was influenced by the incorrect square footage that created inflated CMAs that produced the market frenzy that resulted in multiple offers and thus the contract price.
Appraisers will deny that the contract price itself influences their final number, and I don’t believe it. If final appraisal amount is not influenced by the contract price, then why do most appraisals just happen to land on the exact contract price? Appraisers always request to see the actual contract and they cannot say that the number is not looked at. It is mathematically and statistically impossible that such a high percentage of appraisals would equal the exact sales price without the sales price influencing the appraiser’s final assessment.
In order for the “well, it appraised for that value” argument to hold water, the appraiser would have to be able to honestly say that his appraisal would have been exactly the same dollar number even if the contract sales price had been lower. Given that we hardly ever see an appraisal for more than the contract price (for reasons I won’t go into), I find it highly doubtful that any appraiser would have appraised this particular home for the exact value of my buyer’s offer, had that offer not existed.
So, absent the high offer made by my Buyer, the appraisal amount that legally traps my Buyer in the deal would not exist. Since that high offer existed based largely on incorrect market data generate by the Seller’s unintentional misrepresentation of the square footage size, it invalidates the argument that the appraisal amount binds the Buyer to the deal. If you’re an appraiser or lawyer and want to debate this with me, have at it. I’m willing to listen and learn, but common sense and math are not on your side.
So what is the home really worth?
The irony of this is that the home may very be worth what my buyer was willing to pay, but probably not. I won’t know until I see what the house eventually sells for, but I’m betting it will be for less than my buyer offered.
But because of something we call “gap pricing”, a home like this one can often sell for more than a Realtor’s CMA would suggest. This is because once a neighborhood starts seeing a gap in pricing between the smallest homes and the larger ones, the smaller ones benefit from the fact that buyers who want to “buy in” to a particular neighborhood will make concessions on home size just to get into the neighborhood, its schools, amenities, etc.
So, when only 2 or 3 homes are on the market for below $250K in a highly desirable neighborhood with an average sales price of $300,000, we can often see the lowest priced homes get bid up.
But if that happens with this home after it returns to the market, it will sell to a fully informed buyer who intended to purchase a home less than 1800 square feet in size, and who made his offer knowing full well exactly how much higher he is willing to go over the sales comps for a home of that size in that neighborhood. And the Seller would know that the offer he receives is made by a fully informed buyer who knows the correct size of the home he is purchasing and who has looked at market analysis prepared using the correct square footage.
So what would have been the fair thing to do?
If I were the seller in this situation, I would have accepted the buyer’s offer to reduce the sales price to the original full list price, which was $3,000 higher than the market analysis suggested for this home. If I didn’t want to do that because I thought the home, even with the correct square footage listed, would sell for more than list price anyway, and that I could get that from a new buyer, I would have acknowledged that an honest mistake was made and let the buyer out of the deal. I would not have said to the buyer essentially “screw you, you have to pay me the full price you offered even though we all now know that that offer was made as a result of a misrepresentation of square footage by me.”. It wouldn’t matter to me that an attorney says I can try to hold the buyer to the original price. I would want to do the right thing.
What would you have done if you were the seller or the buyer in this situation? If the buyer had gone ahead and felt pressured to close at the original contract price, would we be able to say this was a win-win deal and would we be able to say that all parties were treated fairly?
{ 63 comments… read them below or add one }
Interesting. Just goes to show you how wrothless appraisals are. It’s the same CMA but includes factors that have nothing to do with market conditions (rebuilding cost, etc.) Appraisers should come up with a number not knowing the contract price, otherwise it’s the same as dry-labbing.
We did eventually get the Seller to sign off on the earnest money return to the Buyer on this deal.
Is this in Travis Country or in Circle C? These are the two areas where medium homes are 300,000 and up.
What if the seller had purchased the house thinking that it was 2100 sqft and he came to know of this discrepency only now?
If a buyer discovered the wrong square footage later, it would be too bad according to most attorneys.
We are moving to Texas, and I can’t help but suspect that this is a common problem. I was previously a realtor, and many houses seem smaller than their sqare footages suggest. I found this webpage because I was wondering if the square footage includes part of the garage or patio, like they do in Miami, Florida. Yes, I’m working with a realtor.
Square footage in most places only includes the heated and cooled areas of a home. That’s the way it is in Texas.
So if a buyer purchases a home having been appraised at a certain square feet and then finds out the home is quite a bit smaller when he goes to sell due to another appraisal, there is nothing they can do? Can they not sue the appraiser?
Hi Laura,
They can sue the appraiser, but would have to prove financial harm. In this case, the buyer bought a house (he thought) bigger than what was listed and what the tax records reported. He didn’t offer to pay more when this happened as far as I know. It would be hard to turn around and sue the original appraiser unless the actual appraised value turned out to be overstated for the correct size of the home.
Steve
Texas is a state that goes to great lengths to protect Buyers. It is unfortunate that Buyers are not automatically given a free and clear option to a full refund of their deposit and any additional expenses incurred (i.e., inspections, appraisals, surveys, etc.) when Builders (or other Sellers) misrepresent square footage. Truly, any informed Buyer with a licensed agent will be examining comps for price per square foot averages before making a contract offer. Yes, despite the variations in amenities in each comp, we do eventually look at price per square foot! Even when the price is further negotiated, perhaps even in the Sellers favor, the Buyer should still be considering comparable property pricing to make certain they are not overpaying for a home.
That said, when the square footage is not correctly stated or purposefully misrepresented (and some rooms are difficult to measure so let’s say, off by more than 40 square feet), a Buyer has not gotten a fair shake. So, my advice would be to write into the contract that if the square footage stated in the MLS is not supported by a new appraisal, and the parties have confirmed the appraiser’s new measurements to be correct, a Buyer should be able to renegotiate a contract to their satisfaction when the house does not have the advertised square footage OR have the option to walk away free and clear with refund and any expenses in hand. Certainly a seller will probably not like to see this written into the contract but consumers must protect themselves. And if the seller is hesitant to sign a contract with this stipulation at least the Buyer will then be aware that the Seller may not be that certain of the stated square footage before the Buyer is faced with this reality a week before closing!
Hi Jane,
Your “Opt Out” idea sounds reasonable, but as a Seller I’d want it to go both ways. I’d tell the Buyer “ok, if it turns out bigger than what I thought, you’ll pay me more”.
Has to be a two way street. We just had another of these by the way. House was smaller, but when we redid the comps based on the smaller square footage, the price held.
Steve
Hi Steve, was the footage including the exterior wall? That could be 100 sq ft difference.
I’m involved in a similar case in Virginia. The square footage was overstated by 228 sq. ft. (17%) based on a prior appraisal given us by the Seller. The buyer refused to close and a mutual release was signed. The house did appraise for the sales price, and was resold immediately. Now, 18 months after the fact, the buyer is seeking reimbursement for his appraisal fee and inspection fee, claiming misrepresentation, and has made a complaint to the Virginia Real Estate Board.
We just purchased a home that went one step further. We bought the house not knowing the agent had inflated the size of the home by including unfinished attic space and unfinished garage space (a side room) to the tune of 483 SF. Yes I said unfinished. It is attic space with no windows, no insulation, no heat/cool, nada.
Due to a fast close, and the fact our broker forgot the appraisal for the signing (so I never saw it), we signed (big mistake) and then 3 days later rec’d the appraisal showing the wrongdoing-we are officially duped.
The agent and agents priciple broker stand behind their practice of adding unfinished attic space and garage space-unreal-and hide for cover under the disclaimer at the bottom of the RMLS listing. Even my agent flipped sides with her freind-the broker telling us to be happy, we still got a good deal, the house appraisal came out ok, so what if you got 483 SF less than you bargained for, be happy and move into your new home (that we helped you get ripped off with).
SInce the agent is the one who did this, and did not mention the SF adders in the description, I feel it is fraudulent activity so we are looking into a lawsuit against the listing agent.
Even the way the SF was calculated is amazingly wrong, she admits to taking a previous appraisal, which sketched but did not include SF data for, and used the sketch to scale the lines on the sketch to determine the attic SF. That admission alone should be grounds for her to lose her license if nothing else.
We have filed a complaint with the state of Oregon already but that will only confirm or deny the wrongdoing of the agent, and possibly result in suspension or loss of license. To be compensated, I will have to sue them in court.
I welcome any coments.
Hi Scott,
Unfortunately, unless the Brokers involved value the avoidance of legal wrangles, you’re probably going to experience what I describe in the article. Thus far, the courts and lawyers have held that you are not purchasing a specific number of square feet but that you are purchasing a house. The size of the house you walked through and saw hasn’t changed.
I don’t agree with the legal viewpoint on this. I think a good lawyer could prove with evidence and testimony that buyers do in fact purchase based on valuation that rely on square footage.
Steve
Steve
I know and thus far you are right but think of this analogy. SInce real estate agents and used car salesman are mostly vermin of the same nature, it is fitting.
You buy a used car for $20000 with 40000 miles on it. Like a home and the home square footage, you buy the car you like and try to get low miles too. These are the two main factors assuming it runs well and is in good shape and so on.
After you drive it off the lot, and you take it in for the first oil change, the attendant puts in the VIN number for your new vehicle but it’s already in there under the previous owner, and guess what, the mileage is now lower than it was before. The last oil change shows 50000 miles, previous owner.
At this point you know you’ve been cheated and guess what? the law would go after the previous owner and the salesman to determine who turned the mileage back and one of them goes to jail.
Why is the home sale with incorrect SF listed any different? You bought the car and liked it before, so what if it actually has a few more miles on it, its still the same car. You should have known the mileage was probably off or asked the owner for the maintenence records right?
I don’t know why the law seems to be protecting this fraudulent practice for real esate agents. Fraud is fraud. The guilty should pay. I believe we have a clear case of fraud.
We have an attorney looking into our case right now to see if we can prove fraud has ocurred. If they can, we will probably go for it but only if they believe very strongly that fraud can be proven, not just neglegence.
I’ll try to keep you posted.
Hi Scott,
Like I said, I’m on your side. Keep us posted on what your attorney is able to determine.
Steve
I am in a very similar situation right now in the Houston area. We are locked into a contract and have found out, by the appraisal, that the house is actually around 400 square feet smaller than on the tax records. The seller did not have an appraisal when it was purchased one year ago, and claims not to have known that the house was smaller. We are two and a half weeks from closing, and with the house being appraised for lower than the sales price by a few thousand, the seller does not want to lower the price now.
Hi Steve,
My wife and I liked the floor plan and location of a home located in Joshua Texas. We noticed the home did not feel as large as the MLS listing stated, the home totaled approximately 800 sq feet smaller than the listing (based on the room dimensions given in the MLS listing). Our realtor was granted access to measure the home confirming our number (2364 listed in the MLS, 1560 actual measurement) We submitted an offer based on comps and the actual sq footage of the home and were immediatley scolded by the listing agent who stands by the 2364 sq foot figure even though she admits to having no idea how to calculate sq footage. We were told if we were to pay for an appraisal she would adjust the asking price accordingly. In my opinion, this is borderline criminal if not outright illegal as a 30% discrepancy is not just accidental. How can I be sure she will deal with me and not another party since I’m no doubt a thorn in her side. Also, since this is clearly a case were the discrepancy was identified up front, and an offer was made based on the actual size of the home (it was rejected of course), is there any legal recourse available to deal with the obvious fraud.
Steve,
An owner has no obligation to accept an offer, regardless of the rationale of the prospective buyer. If the seller doesn’t want to listen to your sqft information and consider your offer, he doesn’t have to.
The issue of how the sqft is represented by the listing agent is different. If the agents knows (or should have known) that a there exists in the advertising of the home a material misrepresentation of fact, and is ignoring that, the agent could be in violation of the Realor Code of Ethics Article 2 which states “REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.”
I would schedule an appointment with the Broker of the listing agent. I’d be non-confrontational and explain that you like the house and wish to buy it, but not based on an inflated list price which results from an incorrect sqft.
If that doesn’t work out and you believe that the Brokerage is continuing to misrepresent the size of the home, you can let the Broker know that you will consider filing an ethics complaint with the Board of Realtors or TREC. None of that, however, can force a seller to accept your offer so you might also consider just moving on.
Steve
Steve why shouldn’t the real estate agent like yourself be required to understand how to measure a home. As mentioned above its not very difficult. Why should a home owner have to wait for an appraisal. Shouldn’t I expect if I has a homeowner ask a real estate agent to list my home shouldn’t they take the 30 minutes or so to measure the home. I don’t think thats asking to much of someone thats going to be paid thousands of dollars. You appear to understand the basics of measuring a home why don’t you take the time to measure the home, please don’t say thats not my job. I see above were everyone wants to sue everyone. If I am going to pay thousands of dollars to a real estate agent why shouldn’t they take thirty minutes to measure my house.
Hi Paul,
> Steve why shouldn’t the real estate agent like yourself be required to understand how to measure a home…please don’t say that’s not my job.
Well, it’s actually not as easy as you think, for starters. Many homes have complicated layouts or two stories. Realtors are not trained to measure homes. Second, it really isn’t our job and we’d be written up for violation of the code of ethics for operating outside our scope of expertise.
I understand what you’re saying, but it’s more complicated than spending 30 minutes measuring a home. Each measure will, even by the same person, will yield a slightly different number.
Also, interior measurements are used in some instances whereas exterior “corner to corner” measurements are used in others. Do you subtract interior wall widths or include them? What about dead space under the stairs or areas under low sloped upstairs spaces? There are far too many variables.
Steve
Update
We have filed with the state board against the sellers agent. The state has since decided to launch an investigation based on seeing the evidence. I will keep you posted.
Despite my insistance that we will not pursue unless we have a near “slam dunk” win, and the fact that the attorney and his company have a tradition of representing real estate professionals against such lawsuits, Our attorney is advising that we go ahead with a lawsuit against the parties involved including seller, sellers agent, buyers agent, and possibly the mortgage broker for the buyer since their was probably collusion between the two withholding information from the buyer(me).
The attorneys feel this is a clear case of deliberate fraud and misrep. because the sellers, and sellers agent included but did not disclose the additions of both unfinished garage square footage, and unfinished, uninsulated, undocumented attic space.
I will keep you posted on the progress.
Thanks Scott. Will be interested to hear how things turn out.
Steve
Sounds like the shoe fit and the buyer liked it. That is the danger of buying a car by the wheel….they all have four but some have more room than others.
I’m in the process of selling my house due to a company transfer. Part of the relocation package is that my company will buy my house if I’m unable to sell it. While I realize the relo company will complete extensive appraisals, I’m concerned because a house in my neighborhood that recently sold (it’s the exact same house i have minus the 350 sq ft room over the garage) has the incorrect square footage indicated. In fact, the house was on the market for 20 months. For the first 18 months, the original Realtor listed the sq ft at 2100 (which is correct), however, the second Realtor listed the sq ft at 2500. While I suspect the new owner isn’t concerned, what can I do to ensure my house isn’t negatively affected when it’s appraised due to an inaccurate market comp?
Mark,
I would focus on your house and its attributes. It’s your agents job to point out incorrect imformation contained in sales comparables to any buyer agent who might try to use the other sale to justify a lower price on yours, or to an appraiser.
If you’re talking about the County appraiser, and property tax implications, wait and see what your appraised value is and make a decision at that time.
Steve
We just realized our appraisal/escrow documents list our home at 1794 sq ft – The home directly across from us just sold, and their documents list at 1368 sq ft. This is the EXACT same A-Frame home. Are you really suggesting we have no recourse? Sombody really dropped the ball, and either way we are getting the short end of it. A: we paid too much for too little home.. or B: when it comes time to refi, our comps will never match up. Please please please tell me escrow insurance or something will assist us with this.
Hi Jennifer,
You’d have to take up the issue with your agent and the seller. You are not without recourse, such as discussing and changing the agreement, backing out, etc., but a lawyer will tell you that you have no LEGAL recourse supported by case law.
How do you know the house across the street is measured correctly? I go measure the outside perimeter of your house and figure the square footage on your own, excluding garage or other unconditioned space (not heated or cooled). Then you’ll have verified facts with which to proceed.
Steve
Steve
Case Update from Scott in Oregon.
We are the ones who purchased a home last June, only to find the real estate agent misrepresented the SF of the home by 450 or 600, depending on which flier you were looking at.
We reported the agent to the state board for real estate. They did an investigation-which is still in progress. The last word is that the State is Taking Action against my real estate agent for not stopping the sale when we explicitly asked to have the SF verified in Two e-mails before signing. She did nothing and knew it was not correct.
I don’t know if action will be taken against the selling agent who misrepresented the house in the first place but we turned her in to the state as well.
So there’s some good news out there for all you honest people out there who have been “ripped off” by by dishonest real estate agents.
Patience is the key here, we turned them in immediatley after we learned of the fraud-that was last June 2008- and it’s still not resolved.
My attorney feels we have a very strong case advising that we wait to see what the state rules first, then proceed with legal action against all parties involved.
Scott
Hi Scott. Thanks for the update.
Getting a Realtor in trouble for not protecting you from something they could or should have known about is very different than winning a case in a court of law.
I’m still unaware of any case where a buyer has succeeded in proving that they contracted to pay a specific price per square foot for a home and received a judgment for damages.
That doesn’t mean such a case would not be successful. Many test cases, such as mine above, never make it to court because the parties just work it out.
Steve
Steve
You are incorrect. Take a look at the attached link from your own state of Texas.
Damages were awarded to the buyer and uphelp on appeal.
http://activerain.com/blogsview/709676/Listing-Agent-pays-buyer
Hi Scott,
That case doesn’t change anything. I’ve verified it with a Texas Association of Realtors attorney just now. He was very familiar with the case.
It was a “facts driven” case, not a case driven by law. In other words, the jury just felt sorry for the poor Doctor and didn’t like the old Broker.
But it hinged on the fact that the Broker failed to cite the source of the square footage in the MLS listing, which was a clerical error. As long as the source is cited, a Broker or Seller cannot be successfully sued for it being wrong.
The difference in this case was 70 square feet and the jury awarded the buyer a couple thousand dollars. The Broker didn’t appeal and just paid to end it.
Also, this was an appellate court case, not one decided by TX Supreme Court. It doesn’t set new a new precedent.
Buyers remain responsible for verifying the correct square footage on a home they buy. If the source of the square footage they rely upon is stated in the MLS listing, as it is in the Austin MLS, it’s up to the buyer to dig deeper into the source should they so chose, and the seller cannot be held responsible, not the Broker, if it turns out to be wrong.
As a practical matter, in the event of a scenario such as I wrote about in this article, the buyer and seller are probably not going to sue each other and the deal will either terminate or the price will be adjusted. Had my buyer closed on the sale, he’d have had no legal recourse to come after the seller after the fact.
Steve
I remember in the old days that square footage was measure in actual living space,lengthXwidth when did this change,I am talking about going inside and actually measuring all rooms.Now they are saying you have to account for the space in the walls.So what does the 75.00 a square foot actually cover,get confusing and sounds like a new way to milk us for all we have.Who came up with this little gem as it didn’t used to be that why?
Any time the square footage doesn’t match the tax rolls, it should send a red flag, because the alternative scenario to having a misrepresentation of the square footage is that the house was enlarged without permits. That in itself can be a big issue because the city could then require you to bring the building up to code post construction, which is near impossible.
Steve-
I am currently about to put an offer on a home in Texas (DFW). The tax assessor has determined that the home is 1790 sq. ft. while the seller’s agent has listed the property as 2371 sq.ft.
I have been looking at homes for about 6 months now and really like everything on this home as far as amenities go. I feel like the home is not 2371, but feels like 1790.
The value came from the appraiser, similar to your case. Do you have recommendations on how I should approach this?
Also- it seems funny that they say that it is the “same home” just a different number because when we spoke with the seller’s agent about price was that it was a low price per square foot for that area.
Comments are appreciated! I figure I should make an offer and hire someone to verify sq. ft. I am not an investor and I cannot afford to lose money on this deal- so I want to make sure that I am doing everything correct.
> Comments are appreciated! I figure I should make an offer and hire someone to verify sq. ft.
That’s what I would do, during the Option Period have it measured.
Steve
We actually have the opposite situation to everyone here. We have a situation where we are about to close in a week and the lender requested appraisal. Appraisal came to be around what was stated in the listing. But, county records show lower sq. footage by about 500 sft. Since the house sq. fotage is what we were expecting to get, we want to go ahead and close . In the future, will this become a problem that the actual size and county records do not match? If we go to the county to get this corrected, would we be required to pay any back taxes on the difference? Who would be liable to these back taxes ?
> In the future, will this become a problem that the actual size and county records do not match?
It’s mainly a problem only when the tax records overstate the sqft. No buyer ever complains about the house being bigger than reported.
You are not required to inform the appraisal district of the square footage, but when this happened to one of my houses, I did anyway. I just like to keep my side of things above question in all matters. They won’t back charge you for taxes.
Steve
This became a real problem for my wife and I when we went to refinance recently. Our house had been sold to us and appraised at least 3 times at 1756 square feet. When we paid for a new appraisal for the refinance the house was found to be 1681 square feet. Based on a per foot price, our house value reduced by over $7,000 and meant we could not refinance due to the loan to value ratio. Other than having the county tax record corrected, is there any other recourse for this?
> Other than having the county tax record corrected, is there any other recourse for this?
Not that I can think of. But I’d remeasure to see if what the correct measurement is the most recent or the three previous. Seems like if three previous said the same thing, the most revcent different one would be questionable.
Steve
I recently put in an offer for a house which I thought was overly priced to begin with. After the initial acceptance by seller, i quickly did my home inpection, prior to the appraisal, come to find out the home is 200 sq ft. smaller than represented by the seller. So, I told my real estate agent to halt the home appraisal due to the fact that this house is mis-represented by 200 sq. ft. So, I did some research on the neighborhood and found out that this condo, not a house was overly priced. There were seven other condos in the area going for 74k, 80k and I had put an offer for a 1400 sq. ft. home at $115k. Now, I have re-negotiate down to 100K which I felt was by far a better deal than what the others in the area have been sold for. The petty part about all this is that my stupid real estate agent advises me to go ahead and offer $113 when I have initially looked at others homes sold for less. Where do these real estate agents get their education from??? I am trying to be fair and my own agent is trying to convince me to put in a higher bid. I really did not care if this deal goes through or not because I felt I got swindled by the seller. I put in the re-negotiating price only becuase I thought it would be a fair price if the seller still wants to sell it. I highly doubt they will because of their intention to sell the house for more sq footage than what it was, I intend to make sure the whomever is going to buy this house to know that they are being swindled by the seller.
This situation just happened to me and our deal fell apart last week because the sellers refused to sell for the appraisal price and that is all the banks will back at this point. In our case, we were the second couple to terminate a contract on the property and now the sellers agent has reposted the house still at the wrong sq. footage. Is it not illegal to knowingly post the wrong sq. footage and mislead someone into making an offer on the house?
We should get our Earnest Money back since the house did not appraise for what they were asking, but now I’m out over $1200 and the house was knowlingly mis-represented from the beginning.
Ryan,
Your option is just to move on and look for the next house. You can’t force a seller to adjust a price based on appraisal. If you believe a violation of Ethics has happened, or is happening, check with your local real estate commission or board of Realtors to find out what you can do, otherwise let it go.
But if the agent is reporting a public number (from the tax records), and stating the source, that is not a violation of ethics. There may be a requirement, however, to disclose that the tax sqft number may be incorrect. A prudent agent would disclose this up front, in my opinion, but it’s a can of worms because each time it’s measured a new number will be produced.
Steve
It seems this is becoming a huge problem in the real estate industry. When is the government going to step up and make someone responsible for it?? This is all the reason why we are still sunk in this slow moving economy.
Since, I have not heard anything back from the seller, I am putting in my withdrawal of offer on the condo and moving on.
Ryan, Steve is right. The best thing is to move on.
If you’re out $1200, I would go to the county and check to see what the county has the house sq. footage as. If the y re-listed the house according to county records then there is really nothing you can do to get your money back, but if they did not you can turn the listing agent to the REC and see what happens.
Thanks Steve and Stacy, we have already moved on, but I just don’t want a 3rd couple to get duped into making an offer and have to go through the same headaches we have only to find out the property was listed as being over 200 sq. ft. larger than it actually is. Mistakes do happen, but after we found this out, we realized they already had an appraisal from the previous couple that showed the sq. footage was much smaller as well and they just didn’t disclose it until our appraisal came in at even a lower sq. footage. It’s true that the tax record has the wrong amount and they maybe didn’t know it until a couple months ago, but since then they have re-listed the property twice knowing the information is not correct. Who would I inform about this, I just want to drop a line to the appropriate people so that someone else can look into it to save any potential buyers the headaches I have been through.
Thanks!
Ryan,
Since this is the second time they re-listed the home still with the wrong sq. footage, I would definitely turn and file a complaint about the listing agent and the firm or broker to the Real Estate Commission in your state. It is not only wrong that the real estate agent is aware of it but still re-listed the house. Make sure you keep all of your paperwork if you do plan on filing a complaint to back up your complaint.
I purchased a home in 2006 and made the offer on same based on the square footage of 5284. We never saw the banks appraisal, just head from the banker that it appraised for full value.
Six months ago, we refinanced and got an excellent appraisal but did not notice the square footage until we decided to sell and noticed the appraisal came back with 4757. This 537 underage is a huge misrepresentation on the paert of the builder and his Realtor.
Based on square footage, our appraisal sould be 11.27 % higher.
All buyers buy on the house AND the square footage.
We have consulted an attorney and in Texas there is a 4 year period of time on Contract misrepresentation to go back to the seller and seek restitution.
Steve we purchased a 2 story home (built in 74) in Sept of ’05 that was listed at 2890 sq ft for $145,000. No approximates on the listing AT ALL. The realtor was the seller’s mother. We were living in our first home, just 1200 sq ft, when we made the offer on this home. The realtor pushed us to use a local mortgage broker, to help speed up the paperwork. We NEVER saw our appraisal before closing but we did ask for it several times. All we were told was that the home appraised for the purchase price. We made it VERY CLEAR to the realtor that our offer was based on $50 a square foot and even produced 2 pages of comps from our neighborhood. Exactly 32 days AFTER closing we FINALLY rec’d the appraisal, on our anniversary, which stated the home only contained 2187 sq ft. We are talking 703 sq ft difference! Called the appraiser and he said yes I appraised the home when the owners purchased it and it was 2187 then. AUGH! Called the realtor and she said it’s still the same home you loved you need to just be happy with it. If you are not I will list it for you! Filed suit in May of ’06.
http://www1.odcr.com/detail.php?Case=063-CJ%20%200600475&County=063-
District Court judge granted Summary judgement to defendants Dec ’07. We appealed. Filed Petition in Error and lost. Appealed to Oklahoma Supreme Court and won a UNANIMOUS decision in July of ’09.
http://www.oscn.net/applications/oscn/GetCaseInformation.asp?submitted=true&viewtype=caseGeneral&casemasterID=99071&db=Appellate
The Supreme Court ruled:
http://caselaw.findlaw.com/ok-supreme-court/1107418.html
¶ 31 Buyers of real property may rely on positive representations made by realtors and sellers about the property’s size. Representations of the size of real property are statements of material fact, not expressions of opinion, and a buyer need not conduct a separate investigation to ascertain their truth. If the buyer later alleges fraudulent misrepresentation against the realtor or seller, questions of whether the buyer was in fact deceived and suffered detriment because of the misrepresentation must be decided by the trier of fact. A real estate licensee is in such instances also bound by a professional duty to treat all parties with honesty.
We FINALLY made it to a jury trial on 9/14. We were allowed our own jury instructions which cited the law from the Oklahoma Supreme court. Three of the jurors were homeowners. The realtor was unprofessional throughout the trial. The first day alone the judge had to call her down 5 times and tell her to just answer the question. In three days of trial the Defendants phones rang aloud in court 2 times each day. First the realtor, then the broker and the last day even their own attorney. We produced all the evidence that was black and white and cut and dry. We even called the original realtor (that sold this home to previous owners) and entered her listing into evidence which showed approx 2300 sq ft. She is the LONGEST selling realtor in our city and well respected. She hit it out of the ballpark. We proved they KNEW the home wasn’t that many sq feet and also that the mother/realtor had intimate knowledge of the home since she custom made all the curtains and painted murals in the bedrooms. Last witness they called was the appraiser. He qualified as an expert witness. He stated the home appraised for the purchase price. Our attorney finally got him to admit that the appraisal had NO MERIT in our case because we had been told the home contained 2890 sq ft. Attorney asked if the appraisal would have been more had the home contained 2890 and appraiser admitted it would. Rested and jury came back just 90 minutes later. 10-2 against us and we lost. We were flabbergasted after a 5 year long battle that we had lost considering our case had CHANGED Oklahoma Case Law. SO, now we have a home thats missing 703 sq ft and we are obligated to list it for 2187 instead of the 2890 we purchased. How’s that? SCREWED so I hope your other commenters fair better than we did. Would love to chat with you more.
Hi Dana,
Thanks for your story. Sounds like you took the issue all the way. I don’t see a way where Realtors, Appraisers, or Taxing Districts can ever be held liable for differences in square footage unless, as your case attempted to prove, actual fraud or intentional misrepresentation can be proven.
I just bought another house 2 months ago. The tax records say the size is 1800 sqft. The first appraiser measured it at 1859 square feet. We eventually fired that lender and switched to a different lender, and the 2nd appraiser measured the home at 1832 square feet. A home with our exact, identical floorplan, built the same year by the same builder, a few houses down, is on the market and listed at 1826 square feet.
What size is my home?
If we ever sell this house, have have to pick a size to list it at. Most sellers would want to use the largest verifiable size to make the price per sqft look better, and that’s ok as long as there is documentation such as an appraisal. I’d probably just leave the default tax sqft because it is 100% defensible as a 3rd party source, even though everyone knows the tax measurements are less accurate than an appraisal.
It’s really hard to hold sellers accountable to a variable measure that will be different each time taken. In your case, the difference was very large. In my example above, the largest variance is 3.2%, which is probably not an amount that most people would fuss over, but at $200 per sqft it’s an $11,800 swing in value if price per sqft is the only valuation metric used.
Steve.
Steve and others, thanks so much for this information. It is truly helpful. Living in MA ovr almost 6 years now, my wife and I bought a 1297 sq/ft condo unit in an old textile mill. Great place… being on the board, I have been scanning the old plans that were left behind and come to find out, our place “was” to be only 1097 sq/ft but the final condo document listing the master information and our closing info state 1297. As we are now looking to refinance, we have found that the town has always been listing our sq/ft as 1097 not 1297. Speaking of misrepresenting your sq/ft, the women we bought the flipped property from was a real-estate agent. 200 sq/ft is a big deal to us when it comes to resale and refinancing and that our master docs state our unit at 1297 sq/ft and the town indicates 1097, do you have any incite how appraisers will review this conflict? Any help would be appreciated. Thanks
Hi Jake,
Condos are measured differently than homes. Homes are measured from the exterior such that a rectangle house that’s 50ft x 30ft would be a 1500 square foot home. That exact same floorplan, if a condo, would have a much smaller sqft size, even though it’s actually the exact same size, because condos are measured from interior walls. I’d call and talk to a real estate appraiser in your local area and ask how they do it there, but I’m pretty sure it’s the same everywhere. Once you know the method, you can measure it out yourself.
If it is in fact smaller than the tax records, if it’s like Texas, you just take your documentation down to the tax department and they make the correction.
Steve
We moved to Austin about 13 years ago. The home was listed at 3,850 sq ft. It was also listed on the Travis County tax records at the same size. We have had about 3-4 appraisels over the past 13 years and they have all list the home at 3,850. We just had another appraisal completed and it listed the home at 3,650 sq ft. The smaller figure is the correct size. Is there any recourse except to update the county tax records? First of all we purchased a home a smaller size than was represented and we have probably over paid taxes based on the larger size for 13 years.
I’m going through this exact scenario right now (in Austin). The most irritating part is that I almost fell for this trick once already, on a supposed 1660 square foot house offered by the SAME realty company, Avenue One, several months ago (this 1660 sq. ft. looked like a serious contender on the MLS until I found out about the “livable” 350 sq. ft. detached garage with a standard door instead of a garage door, a ratty carpet and a window unit that was included in the total livable space – something the realtor failed to mention until I toured the home. I figured this lil’ trick out pretty quickly, it was called a “game room” by the listing agent – gimme a break!). Anyway, currently I’m about one week from closing on a house listed at 1531 sq. ft., and just got the appraisal back at 1232 (it was listed on TCAD as 1281!). The layout of the house makes it look larger than it is and I never doubted the 1531 as I thought there was some sort of legality in making square footage claims (wow, stupid me, how naive!) and I always hear from realtors not to trust TCAD when it comes to footage. Now, naturally, I’m a bit upset since the house I thought I was getting a decent deal on at 288 a foot is NOW 360 a square foot! This seems to be a trend in Austin I’m noticing, particularly in the older areas where ANY square footage is counted, and I’m talking unusable attic space, tool sheds, garages being labelled laundry rooms, etc, you name it, I’ve seen it. Anyway, I’m at the point where I’m just “going to live with it” for various reasons, but I want to know where this agent got this arbitrary number (my agent is going to contact her tomorrow about all this)? I mean, what is this nonsense? Just be honest, people. I swear, the real estate “game” is really turning into an untamed used car lot!
Hi David,
I don’t think it’s a “trick” or a “game” for 99% of the instances where sqft discrepancies occur. I think it’s usually people relying on bad information, or when there is conflicting information, choosing the number that benefits them most.
Good luck on your specific issue and I hope it gets resolved.
Steve
We have the same issue. The listing square footage is 3878, and the appraisal size is 3633 and the difference is 245 sqt feet. Option period expired about 1 week ago with $3500 EMD. Plan to talk with the seller, but not sure about the outcome since she was pretty stubborn with the inspection repair. We probably have to walk away eventually.Any suggestion would be appreciated.
This is a common problem in my Small Town of Thomasville, GA. Square footage is almost always not correct. Realtors like to use the words like “by owner” when the square footage is not the same as public record. They also like to use the word “total square footage” which includes outside areas. Like porch, deck, and unfinished rooms. Nothing has change and some buyers are clueless about it.
I live in Los Angeles and have a similar issue as well. The home I put in an offer for was almost 900 sq/f smaller which comes to 34% smaller then the listed sq/f. My earnest deposit was $20,000 and the seller is trying to turn a blind eye on me and is refusing to release the deposit. I am in the process of filing a complaint with the Department of Real estate (DRE) but not sure if that will have any impact on my pursuit to reclaim my Deposit. After speaking with a few attorneys they do believe i have a case for fraudulent inducement nothing is 100% sure. It is sad that during such economic times and while the housing industry is in such bad health do potential buyers like myself are being scammed like this. Are there anyone here who won a legal battle with such cases? Couldn’t this be a case for fraudulent inducement?
Will R. its my opinion that you are in the right. 34% is a big difference I can understand 5% even up to a 10% difference but 34% I would think you have a reasonable arguement. I still can not understand how professional real estate agents can hide behind the “its not my job” to measure a home. If a real estate agent does not know how to measure a home as part of their job they should know what they are marketing and to price it properly “the best interest of the client” they should learn how to measure a home. I wouldn’t think to list a home or put an offer in on a home without measuring the property. Public records are correct most of the time but not every time. If it was me I would get an attorney to get my money back I don’t know DRE escrow rules in CA but I would file a dispute. It takes less than 30 minutes to measure most homes. Please let us know how things go for you wish you the best.
I ran into similar square footage problem when I bought my house in San Mateo, California. We found out that there was a 630 square footage(!!!!) discrepancy between the actual and the advertised from the appraisal report.
Of course, both the listing agent or our agent denied any responsibilities and didn’t help us at all when we tried to negotiate the price with the sellers. Our agent even went behind our back and leaked our negotiating strategy to the sellers and trapped us into buying the house at the full price. It was a horrible experience from start to finish with the Alain Pinel Realtors. I posted my review on my agent’s yelp and got threatened by their lawyer. {Moderator deleted link}
Buyers need to work with a lawyer and not with the real estate agent. You can never trust the realtors.
I have a similar story in Redmond, Seattle.
I made an offer to a town house and figured out the seller included the garage (360sqft). We requested a price deduction and did not achieve an agreement. So we decide to quit by disapprove the HOA. Unfortunately, the seller refused to return the earnst money by stating that the re-negotiation based on square footage breaches the contract. I do not know what to do…
I am thinking the only true measure would come from your survey. We are in the process of buying a new home in Port Aransas , TX and it was supposed to be 1200 sq ft of living space according to the plans but the surveyor measures it to be 1160 sq ft outside. So my 40 by 30 house is now actually 29.9 by 38.8. Does not seem like a big deal but the 3.2% difference in size would add up to $4000 if the lot price was taken out of the equation. I am ready to go to closing and have my money in escrow and we want the house but I don’t want to be screwed out of $4000. The plans called for 1200 sq ft of living space and we are only getting 1160 feet of total space (kinda apples to oranges) . To compare apples to apples – Wall perimeter(137.4 ft * 5 inches) if subtracted would take away another 57 feet of living space( I am including interior walls as living space) for 1103 sq ft total so we are overpaying by 97 sq ft or 8% or $10100. I love the house but the closing table could get ugly and I am thinking of trying to get quite a bit held in escrow for mediation as that is what is required in our contract.
> I am including interior walls as living space
Hi Bob, that’s standard, including the interior walls.
This continues to be a slippery subject. Just got an appraisal back today for one of our buyers. I always have butterflies before looking at the sqft. This time, house was listed as 1803 sqft, appraiser said 1787. That’s 16 sqft difference, or 0.0088% smaller. Not enough to fuss over, and within the expected range of discrepancy.
Even 3.2% difference is not uncommon. Not saying you should be happy about it, but even surveyors are going to vary a bit. If you had another surveyor come out, I’ll bet it wouldn’t be exactly the same measurements as the first.
Good luck on your deal. We love Port A and vacation there every year, though we normally stay at the Island House on N Padre and just make daytrips over to Port A.
Steve