Missouri Real Estate Lawyer

Fraudulent misrepresentation is a serious legal issue in Missouri that can significantly impact both buyers and sellers in real estate transactions. Individuals claiming fraudulent misrepresentation must prove seven key elements as established by Missouri courts.

Key Elements of Fraudulent Misrepresentation in Missouri

• False statement or omission,
• Seller’s knowledge of falsity,
• Speaker’s intent for reliance,
• Buyer’s ignorance of the falsity,
• Buyer’s reliance on its truth,
• Buyer’s right to rely on it, and
• Resulting damages.

What is a Fraudulent Misrepresentation in Missouri?

A misrepresentation can be either a false statement (spoken or written) or a failure to disclose a material defect. Disputes often arise over what was actually said. For example:
• State v. Jarrett: A termite company was accused of falsely claiming a home was infested. However, the termite company worker testified that the homeowner told him that the house was infested, and he merely took the homeowner’s word as true.
• Murray v. Crank: Proving that a seller knew about a concealed defect is often difficult, because “fraud is never presumed,” and the evidence must be beyond “mere suspicion.” Brown v. Pritchett, 633 S.W.2d 294 (Mo. App. E.D. 1982). When sellers are silent about material defects, buyers must prove that the seller had a duty to disclose the defect. A duty to disclose generally exists when the seller “has superior information not reasonably available to the [buyer].” But a seller’s duty to disclose arises only when the judge or jury finds that the buyer would not have discovered the defect through ordinary due diligence.
How Do Courts Determine Falsity and Materiality?
Missouri courts determine the truth or falsity of a representation based on when it was made and relied upon (Stevens v. Markirk Constr., Inc.). The misrepresentation must be a specific fact, rather than an overly broad statement or opinion.

Materiality Test

A misrepresentation is material if:
• It directly affects the transaction, and
• A reasonable buyer would reconsider the purchase if they knew the truth (Carnahan v. American Family Mut. Ins. Co.).
Missouri applies an objective standard, meaning that a judge or jury evaluates the facts of each case to determine materiality.

Can Future Promises Be Fraudulent?

Statements about future events are not typically fraudulent unless the plaintiff proves that the defendant knowingly made a false prediction.
• Example: A claim that a property “will not flood” is not actionable unless the seller knew the statement was false at the time (Stevens v. Markirk Constr., Inc.).

Proving Knowledge of Falsity

Proving that a seller knew a statement was false is one of the most challenging aspects of a fraud claim. Courts require evidence beyond mere suspicion (Brown v. Pritchett).
• Inference of Knowledge: If a seller lived in a home and claimed no roof leaks, but evidence showed long-term leaks, the court may infer fraudulent misrepresentation (Wilson v. Murch).

Did the Buyer Reasonably Rely on the Misrepresentation?

To win a fraudulent misrepresentation case, the buyer must prove:
• They reasonably relied on the false statement,
• Their reliance was justified under the circumstances, and
• A reasonable inspection would not have revealed the defect (but only in circumstances where the seller was silent about the defect. A buyer is not necessarily required to inspect the property when the seller makes an explicit representation about the condition of the property. However if the buyer does perform an inspection, then in some circumstances the buyer will be found to have relied upon what the buyer discovered during the inspection). (Richards v. Abn Amro Mortg. Group, Inc.).
Generally, if a defect was obvious or would have been discovered through basic due diligence, courts may rule against the buyer.

What Damages Can Be Recovered in a Fraud Case?

If a seller is found liable for fraudulent misrepresentation, damages are calculated based on the difference between the value of the property as represented (which is typically the purchase price) and its actual value, which is typically determined by an expert appraiser hired by the buyer. Many appraisers often take into consideration the cost to repair the defect. Buyers are additionally eligible to recover their attorney’s fees and in some circumstances punitive damages.

Real-World Examples & Case Studies

To make this more applicable to buyers and sellers, let’s consider some common real estate fraud scenarios:
• Undisclosed Structural Damage: A seller fails to disclose foundation issues, and the buyer only discovers it post-purchase. The buyer can sue for concealment if the seller had a duty to disclose the foundation issue. (See above.)
• Hidden Water Damage: A seller repaints over water damage and denies any leaks. If the buyer can prove the seller knew, they may have a strong fraud claim, especially if the seller’s knowledge of the leak can be inferred from the evidence.
• Misleading Property Descriptions: Sellers advertising a home as “newly renovated” coupled with a specific description what renovations were made could be liable for a fraudulent misrepresentation as to defects in the renovation.

How to Protect Yourself in Missouri Real Estate Transactions

To avoid disputes:
For Buyers:
✅ Get written disclosures, conduct thorough inspections, and if necessary, competent re-inspections. ✅ Ask direct questions, document seller responses, and provide thorough descriptions in any notice of inspection. ✅ Hire a real estate attorney to review contracts and to help you with inspection reports and drafting notices of inspection.
For Sellers:
✅ Be transparent about known defects and disclosures. ✅ Avoid making vague or misleading statements about the property. ✅ Keep copies of all communications to protect against future claims.

Final Thoughts

Buyers, Get Legal Help if You Suspect Fraud: If you believe you have been the victim of a fraudulent misrepresentation, consulting with an experienced Missouri real estate attorney can help you understand your legal options and protect your investment.
Sellers, Likewise Consult an Attorney If You Are Accused of Fraudulent Misrepresentation: Defending yourself in a fraudulent misrepresentation case can result in costly mistakes.

This article is for general informational purposes only, it is not intended as legal advice, and the information provided in this article may not apply to your particular circumstances. Consult an attorney experienced in fraudulent misrepresentation lawsuits for advice and guidance on your particular matter.
Michael John Sewell provides representation in real estate and business law matters. Please contact Michael at (314) 942-3232 or at michael@sewelllaw.net to discuss your litigation or other legal matters.

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