A Texas appellate court has considered whether a buyer could recover damages from a real estate professional's misrepresentation of a home’s square footage when the buyer purchased the property for less than the property's appraised value.
Nancy Sands and Sandra Sasser (collectively, "Salespeople") of Auckland, L.P. d/b/a Keller Williams Realty ("Brokerage") submitted a property listing ("Property") on behalf of a seller into the multiple listing service. The Salespeople listed the property as having a square footage of 4,218 square feet, which they had arrived at by incorrectly adding to the property's total square footage the separately listed square footage for the second floor. The Salespeople had obtained this information from the tax records. The actual square footage of the property was 3,593 square feet.
Julio Matheus ("Buyer") was building a house on a lot that he had purchased. During construction, he sought nearby property for his family to live in until construction was completed. The Buyer planned to sell the purchased property once construction was complete. He made an offer for the Property which came to $78 per square foot. The Salespeople responded to this offer by stating that the list price of $82.13 per square foot (a number computed using the inaccurate square footage number) "was very competitive and a great purchase price."
The Buyer eventually purchased the Property for $81.37 per square foot, or a total price of $343,225. An appraisal was performed at the behest of the Buyer's mortgage lender, and the appraiser listed the correct square footage in the appraisal report. The appraised value of the property was $347,000. The Buyer claimed to have received a copy of the appraisal report after the closing. Upon learning the correct square footage, the Buyer offered to revoke the sale or be credited the difference in the sale price but this offer was rejected.
The Buyer filed a lawsuit against the Salespeople and the Brokerage under the state's Deceptive Trade Practice Act ("Act"). The Buyer claimed he based his offer on a square footage basis, and he was damaged by the inaccurate square footage information. He sought $50,856.25 in damages, which he computed by multiplying the $81.37 square foot purchase price by the missing 625 square feet. The Salespeople and the Brokerage admitted they had miscalculated the Property's square footage. At the conclusion of the Buyer's evidence, the Salespeople and Brokerage sought judgment in their favor because the Buyer had failed to present any evidence as to the fair market value of the property. The trial court granted this motion, and the Buyer appealed.
The Court of Appeals of Texas, Fort Worth, affirmed the trial court's ruling. The court first set forth the proper measure of damages. The Act provides that a party is entitled to receive "economic damages", defined as "compensatory damages for pecuniary loss, including costs of repair or replacement". In this case, the damage amount is either calculated by the "out-of-pocket" expense incurred by the damaged party or the "benefit-of-the-bargain" damages (difference in value between what the party thought they were receiving and its actual value), with the correct measure being whatever gives the damaged party the greatest recovery.
The Buyer argued that the proper measure of damages was the benefit-of-the-bargain damages, based on the difference between the actual square footage and the misrepresented square footage. His argument was based on an earlier case, in which a jury appeared to have made an award to a buyer under similar facts using just such a calculation method.
The court rejected this argument. First, the court stated that the method used by a jury in one case does not mean that this is the rule for all such cases. Second, the difference between the two cases is that in the older case, the buyer claimed the difference in square footage significantly lowered the value of the property. Here, the Buyer made no such claim and indeed could not, as the appraised value of the property was greater than the property's purchase price. So, the Buyer's proposed benefit-of-the-bargain damage calculations actually served to overcompensate him. Further, the court stated that there was no evidence that calculating damages by the square foot was the proper method of calculating damages in the first place, as all of the offers made by the Buyer were in lump sums. Thus, the court ruled that the Buyer had failed to establish that his proposed measure of damages was the proper standard in this case.
Finally, the Buyer argued that he had presented sufficient evidence of his damages. The court found that the purchase price of $343,225 reflected the fair market value property "as represented". So, in order to collect damages, the Buyer needed to offer evidence that the fair market value of the property was something lower. Here, the Buyer offered no evidence as to the property's fair market value of the property. Indeed, the only evidence of the property's fair market value was the appraisal, which was actually greater than the purchase price. Thus, the court affirmed the trial court's judgment in favor of the Salespeople and the Brokerage.
Matheus v. Sasser, 164 S.W.3d 453 (Tex. App. 2005).