📋 Overview: Agent Negligence Claims

Real estate agents in California owe significant duties to their clients and, in some cases, to all parties in a transaction. When agents fail to meet these obligations through negligent conduct, misrepresentation, or breach of fiduciary duty, they can be held liable for resulting damages. This guide covers claims against both listing agents and buyer's agents, as well as their supervising brokers.

When to Use This Guide

Use this guide if your real estate agent or their broker engaged in any of the following misconduct:

🔍 Negligent Inspection

Agent failed to conduct required visual inspection or missed obvious defects under Civil Code 2079

🔒 Failure to Disclose

Agent knew of material facts affecting property value but failed to disclose them to you

⚖ Breach of Fiduciary Duty

Agent put their own interests or another party's interests above yours

⚠ Dual Agency Conflicts

Agent represented both buyer and seller without proper disclosure or while favoring one party

👍 What You Can Recover in Agent Negligence Cases

  • Actual damages - Cost to repair defects, price differential, lost value
  • Consequential damages - Moving costs, temporary housing, lost rental income
  • Rescission - Undo the transaction in cases of fraud or material breach
  • Attorney fees - If purchase contract contains fee provision
  • DRE discipline - License suspension or revocation for the agent

Common Agent Negligence Scenarios

🔍 Failed Visual Inspection (Civil Code 2079)

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California Civil Code 2079 requires listing agents and buyer's agents to conduct a "reasonably competent and diligent visual inspection" of accessible areas of the property. This means agents must personally inspect the property and disclose any observable defects. Common failures include missing water stains, foundation cracks, roof damage, unpermitted additions, or other visible issues that would alert a reasonably observant person to problems.

🔒 Failure to Disclose Known Facts

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Agents must disclose all material facts they know or should know that affect the property's value or desirability. This includes information learned from the seller, observed during showings, or discovered through neighborhood knowledge. If an agent learns about problems (flooding, neighbor disputes, planned construction, crime) they must disclose this information regardless of whether the seller disclosed it.

⚖ Breach of Fiduciary Duty

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Real estate agents owe fiduciary duties to their clients including loyalty, full disclosure, confidentiality, obedience, reasonable care, and accounting. Breaches include: encouraging a buyer to overbid, failing to present all offers to a seller, disclosing client negotiating strategies to the other party, recommending service providers for kickbacks, or prioritizing commission over client interests.

⚠ Dual Agency Violations

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Dual agency (representing both buyer and seller) is legal in California but requires written disclosure and consent from both parties. Even with consent, dual agents must treat both parties fairly and cannot favor one over the other. Common violations include: failing to disclose dual agency, encouraging buyer to pay more than necessary, not presenting all offers equally, or sharing confidential negotiating information.

📝 Misrepresentation

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Agents can be liable for both intentional and negligent misrepresentation. This includes false statements about property condition, square footage, lot size, zoning, HOA restrictions, neighborhood issues, or comparable sales. Even repeating false information from the seller without verification can create liability if the agent should have known it was false or could have easily verified it.

⚠ Time Limits Apply

California has a 2-year statute of limitations for professional negligence claims against real estate agents (Code of Civil Procedure 339). For fraud claims, you have 3 years from discovery. The DRE accepts complaints up to 3 years after the transaction. Do not delay in taking action.

💰 Calculate Your Damages

In agent negligence cases, you can recover damages to compensate you for harm caused by the agent's misconduct. Here are the categories of recovery available under California law.

Category Description
Benefit of the Bargain Difference between property value as represented and actual value
Cost of Repairs Reasonable cost to repair undisclosed defects agent should have found
Out-of-Pocket Losses Inspection costs, temporary housing, storage, moving expenses
Lost Profits For sellers: difference between actual sale price and fair market value
Consequential Damages Lost rental income, financing costs, opportunity costs
Attorney Fees If purchase contract has attorney fee provision (most CAR forms do)

📊 Sample Damages Calculation

Example: Agent Failed to Disclose Foundation Issues

Foundation repair costs $45,000
Engineering and permit fees $8,500
Temporary relocation (6 weeks) $4,200
Post-purchase inspection fees $1,800
Diminished value stigma $25,000
Storage during repairs $1,500
TOTAL DAMAGES $86,000

Special Damages for Dual Agency Violations

If a dual agent favored the other party, you may be entitled to:

  • For buyers: The amount you overpaid compared to what you should have paid with proper representation
  • For sellers: The difference between your actual sale price and what you could have obtained with loyal representation
  • Commission refund: The agent's commission, as they did not earn it through faithful service

💰 E&O Insurance Provides Recovery

California brokers are required to have Errors & Omissions (E&O) insurance, which covers negligence claims. This means there is typically insurance money available to pay your damages, making recovery more likely than suing an uninsured individual.

✅ Evidence Checklist

Gather these documents and evidence before sending your demand letter. Click to check off items as you collect them.

📄 Transaction Documents

  • ✓ Listing agreement (if you were the seller)
  • ✓ Buyer representation agreement
  • ✓ Purchase agreement and all addenda
  • ✓ Agency disclosure form (AD)

📝 Disclosure Documents

  • ✓ Transfer Disclosure Statement (TDS)
  • ✓ Agent Visual Inspection Disclosure (AVID)
  • ✓ Seller Property Questionnaire (SPQ)
  • ✓ Natural Hazard Disclosure (NHD)

🔍 Inspection Reports

  • ✓ Pre-purchase home inspection report
  • ✓ Pest/termite inspection report
  • ✓ Post-purchase inspection documenting defects
  • ✓ Specialist reports (structural, mold, electrical)

💬 Communications

  • ✓ All emails with your agent
  • ✓ Text messages and voicemails
  • ✓ Written notes from conversations
  • ✓ Marketing materials and MLS listing

👤 Agent/Broker Information

  • ✓ Agent's full name and DRE license number
  • ✓ Broker's name and DRE license number
  • ✓ Brokerage company name and address
  • ✓ DRE license verification printout

💰 Damages Documentation

  • ✓ Repair estimates from licensed contractors
  • ✓ Paid invoices for completed repairs
  • ✓ Photos/videos documenting defects
  • ✓ Receipts for consequential costs

💡 Verify DRE License Status

Visit the California Department of Real Estate website at dre.ca.gov and use the license lookup tool to verify your agent's and broker's license status, disciplinary history, and current brokerage affiliation. Print this information for your records.

📝 Sample Language

Copy and customize these paragraphs for your demand letter. Each addresses a specific type of agent negligence.

Failure to Disclose Known Defects
You breached your duty of disclosure by failing to inform me of material facts you knew or should have known about the property. Specifically, [describe what agent knew - e.g., "you were aware of the recurring flooding in the basement as evidenced by your prior listing of this property in 2019 where the disclosure mentioned water intrusion"]. Despite this knowledge, you failed to disclose this information on the Agent Visual Inspection Disclosure or otherwise inform me of this condition. Under California Civil Code section 2079 and the common law duty of disclosure, you were obligated to disclose all material facts affecting the property's value or desirability that were known to you. Your failure to do so constitutes professional negligence and breach of fiduciary duty.
Negligent Inspection (Civil Code 2079)
You failed to conduct a reasonably competent and diligent visual inspection of the property as required by California Civil Code section 2079. A proper visual inspection would have revealed [describe obvious defects - e.g., "the significant water staining on the ceiling of the master bedroom, the visible cracks in the foundation accessible from the crawl space, and the obvious signs of termite damage to the exterior trim"]. These conditions were readily observable upon reasonable inspection, yet your Agent Visual Inspection Disclosure failed to note any of these material defects. As established in Easton v. Strassburger and codified in Civil Code 2079, you owed a duty to conduct a competent visual inspection and disclose all facts revealed by that inspection. Your failure to do so constitutes negligence per se.
Breach of Fiduciary Duty
As my agent, you owed me fiduciary duties of loyalty, full disclosure, confidentiality, obedience, reasonable care, and accounting. You breached these duties by [describe breach - e.g., "recommending I increase my offer by $50,000 when you knew the seller had already accepted my original offer, thereby causing me to pay significantly more than necessary" OR "failing to present my counteroffer to the seller while secretly informing the competing buyer of my offer amount" OR "recommending your brother-in-law's construction company without disclosing your financial relationship"]. Your conduct demonstrates that you prioritized your own interests over mine in violation of your fiduciary obligations under California law. See Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18.
Dual Agency Conflicts
You acted as a dual agent in this transaction, representing both the buyer and seller. While dual agency is permitted in California with proper disclosure and consent under Civil Code 2079.16, a dual agent owes fiduciary duties to both parties and cannot favor one party over another. You violated your dual agency obligations by [describe violation - e.g., "advising the buyer of my minimum acceptable price, which you learned in confidence as my listing agent" OR "failing to disclose to me as buyer that the seller would have accepted $40,000 less than my offer" OR "encouraging me to waive the inspection contingency to help the seller close quickly, without considering my interests"]. This conduct breached your fiduciary duties to me and violated the standards for dual agency representation. See Huijers v. DeMarrais (1992) 11 Cal.App.4th 676.
Misrepresentation
You made material misrepresentations that induced me to [purchase this property / sell this property at the stated price]. Specifically, you represented that [describe misrepresentation - e.g., "the property was 2,400 square feet when it was actually only 1,950 square feet" OR "the roof was replaced in 2020 when in fact it was the original 1985 roof" OR "there were no known issues with the septic system when you knew the seller had the system pumped three times in the prior year due to failures"]. I reasonably relied on these representations in making my decision, and suffered damages as a direct result. Under California law, you are liable for both negligent and intentional misrepresentation. See Wilson v. Century 21 Great Western Realty (1993) 15 Cal.App.4th 298.

📄 Full Sample Demand Letter

Below is a complete demand letter template. Replace all bracketed placeholders with your specific information.

California Real Estate Agent Negligence Demand Letter

[YOUR NAME] [YOUR ADDRESS] [CITY, STATE ZIP] [YOUR EMAIL] [YOUR PHONE] [DATE] VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED [AGENT NAME], DRE License #[AGENT LICENSE NUMBER] [BROKER NAME], DRE License #[BROKER LICENSE NUMBER] [BROKERAGE NAME] [BROKERAGE ADDRESS] [CITY, STATE ZIP] RE: DEMAND FOR DAMAGES - REAL ESTATE AGENT NEGLIGENCE Property: [PROPERTY ADDRESS] Transaction Date: [TRANSACTION DATE] Claim Amount: $[TOTAL DAMAGES] Dear [AGENT NAME] and [BROKER NAME]: I am writing to demand compensation for damages I suffered as a result of your professional negligence, breach of fiduciary duty, and failure to comply with California disclosure requirements in connection with my [purchase/sale] of the property located at [PROPERTY ADDRESS], which closed on [TRANSACTION DATE]. STATEMENT OF FACTS On [TRANSACTION DATE], I [purchased/sold] the above-referenced property. You, [AGENT NAME], served as my [buyer's agent/listing agent] in this transaction, operating under the supervision of [BROKER NAME] and [BROKERAGE NAME]. Prior to closing, you provided me with the Agent Visual Inspection Disclosure (AVID) dated [AVID DATE], in which you represented that you had conducted a visual inspection of the property. [You also acted as a dual agent in this transaction, representing both the buyer and seller - include if applicable.] Following [closing/my purchase], I discovered the following material defects and issues that you failed to disclose: 1. [DESCRIBE DEFECT #1 - e.g., "Significant foundation cracking and settling, requiring $45,000 in repairs"] 2. [DESCRIBE DEFECT #2 - e.g., "Hidden water damage and mold contamination in the master bathroom, remediation cost $28,000"] 3. [DESCRIBE DEFECT #3 - e.g., "Unpermitted addition of the family room, requiring approximately $15,000 to bring to code"] These defects were [observable upon a reasonably competent visual inspection / known to you based on [describe how agent knew]]. LEGAL BASIS FOR CLAIM Your conduct violated multiple provisions of California law: 1. California Civil Code Section 2079: You failed to conduct a "reasonably competent and diligent visual inspection" of accessible areas of the property and disclose material facts revealed by that inspection. The defects described above were visible and observable to a reasonably competent inspector. See Easton v. Strassburger (1984) 152 Cal.App.3d 90. 2. Breach of Fiduciary Duty: As my agent, you owed me fiduciary duties of loyalty, full disclosure, and reasonable care. You breached these duties by [describe specific breach]. See Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18. 3. California Civil Code Section 1102: You failed to properly complete the Agent Visual Inspection Disclosure, omitting material defects that should have been disclosed. [If dual agency: 4. California Civil Code Section 2079.16: As a dual agent, you were required to treat both parties fairly and disclose all material facts to both parties. You failed to do so by [describe dual agency violation]. See Huijers v. DeMarrais (1992) 11 Cal.App.4th 676.] [BROKER NAME] is vicariously liable for [AGENT NAME]'s conduct under Business & Professions Code section 10177(h) and the doctrine of respondeat superior. DAMAGES As a direct and proximate result of your negligence and breach of duty, I have suffered the following damages: [REPAIR DESCRIPTION #1]: $[AMOUNT] [REPAIR DESCRIPTION #2]: $[AMOUNT] [REPAIR DESCRIPTION #3]: $[AMOUNT] Inspection and engineering fees: $[AMOUNT] Temporary housing during repairs: $[AMOUNT] Storage costs: $[AMOUNT] [OTHER DAMAGES]: $[AMOUNT] ___________ TOTAL DAMAGES: $[TOTAL DAMAGES] Documentation supporting these damages, including inspection reports, contractor estimates, and receipts, is available upon request. DEMAND I hereby demand payment of $[TOTAL DAMAGES] within thirty (30) days of the date of this letter to compensate me for the damages described above. If I do not receive payment in full by [DEADLINE DATE - 30 days from letter date], I will pursue all available legal remedies, including: 1. Filing a civil lawsuit against you and your brokerage seeking full damages, attorney fees as provided in the purchase agreement, and costs of suit; 2. Filing a complaint with the California Department of Real Estate seeking disciplinary action against your license; and 3. Reporting your conduct to the local Association of Realtors ethics committee. Please direct all communications regarding this matter to me at the address above. I am willing to discuss resolution of this matter, but absent a satisfactory response, I am prepared to pursue litigation. Sincerely, _______________________________ [YOUR NAME] Enclosures: - Copy of Purchase Agreement - Copy of AVID - Inspection Report dated [DATE] - Repair Estimates - [Other supporting documents] cc: [YOUR ATTORNEY, if applicable]

⚠ Before Sending Your Letter

  • Replace ALL bracketed placeholders with your specific information
  • Review your purchase contract for mediation/arbitration requirements
  • Send via certified mail with return receipt requested
  • Keep copies of everything you send
  • Consider having an attorney review your letter before sending

🚀 Next Steps

What to do after sending your demand letter.

Expected Timeline

Days 1-7

Agent/broker receives letter and forwards to E&O insurance carrier

Days 7-21

Insurance adjuster reviews claim and investigates

Days 21-30

Response with settlement offer, denial, or request for more information

If They Don't Respond or Pay

  1. File a DRE Complaint

    File a complaint with the California Department of Real Estate at dre.ca.gov. The DRE can investigate and discipline the agent's license, which creates significant pressure to settle. You have 3 years from the transaction to file.

  2. Check for Mediation/Arbitration Requirements

    Most CAR (California Association of Realtors) purchase contracts require mediation before litigation. Review your contract - failure to mediate first may waive your right to attorney fees.

  3. Consult a Real Estate Litigation Attorney

    Many attorneys handle agent negligence cases on contingency for claims over $50,000. The attorney fee provision in most purchase contracts means you may recover your legal costs if you prevail.

  4. File a Lawsuit

    Claims under $12,500 can go to Small Claims Court. Larger claims are filed in Superior Court. Name both the agent and the supervising broker as defendants to access E&O insurance coverage.

  5. File a Realtor Ethics Complaint

    If the agent is a member of the National Association of Realtors, you can file an ethics complaint with the local board. This can result in fines, suspension, or expulsion from the organization.

Need Legal Help?

Agent negligence cases require proving what the agent knew, should have known, or should have discovered. Get a 30-minute strategy call with an attorney to evaluate your case.

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California Resources

  • CA Dept. of Real Estate: dre.ca.gov - License lookup and complaint filing
  • DRE Consumer Line: 1-877-373-4542
  • DRE Complaint Form: RE 519 (available at dre.ca.gov/consumers)
  • State Bar Lawyer Referral: calbar.ca.gov
  • California Civil Code 2079: leginfo.legislature.ca.gov
  • Local Realtor Association: For ethics complaints against NAR members

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