Texas Square Footage Case a Huge Loss for Consumers

When it comes to Realtors® and square footage, they have the public totally fooled. The mystery over measuring square footage allows them to price homes based on inaccurate square footage, using their all-powerful price-per-square-foot formula, and no one seems to be talking about the problem or trying to help consumers. It appears that’s just the way they want it.

Many of you have heard by now about the appeal and reversal of the case filed against Ebby Halliday Realtors® in Texas. The case stemmed from a 2015 condo sale where the MLS used a drop-down menu with auto populated information from the appraisal district record, or what I would call their local county assessor records. In this case, the tax records reflected 1,178 square feet, which turned out to be only 885 sqft, or a difference of 293 sqft. Living in our price-per-square-foot world, that is a HUGE different in square footage. The question arises as to if a reasonably prudent real estate agent would recognize a difference in sqft of 293 feet out of a reported 1,178. In my opinion, if they can’t see that difference, they should find another job. Licensed Realtors® are supposed to be the ultimate real estate experts. Consumers rely on their expertise to make their largest, single lifetime investment. We expect every other professional to be competent in their chosen profession. Why are Realtors® different. They are the only industry in the real estate world without “standards” to work from. For all their talk of consumer protection and putting their clients first, when it comes to square footage they hide behind the door and claim “we don’t want to talk about it.” According to many real estate professionals, there are no required measurement standards so we just use the tax department’s information since they use professional appraisers to properly measure homes. WRONG! The vast majority of Realtors® know the square footage details contained in tax records are in error a very large percentage of the time yet they continue to use this inaccurate information on an unsuspecting public.

The county assessor has no need for precise square footage data and they never enter any dwelling. Without entering a dwelling, it is impossible to get an accurate home measurement and square footage total. They are the first to tell you their information is an estimate, for assessment purposes only. Realtors® have promoted the great myth that tax records contain the “Official Record” when it comes to square footage. That is simply not true and this myth has been abused by the real estate industry to try and reduce agent’s liability for square footage errors. From 1908 (when the Realtor® organization was founded, until the mid-nineties, when tax records became available online), every listing agent was responsible for either measuring a home’s square footage or having it measured by a qualified agent or an appraiser.

The vast majority of CMAs (Competitive Market Analysis) are created using a price-per-square-foot formula. If that sqft number is wrong, then the home seller is very likely going to lose money. But, the listing could be easily under priced or over-priced depending on the amount of a sqft error. Using the square footage from tax records almost guarantees (especially in homes with upper or lower levels) a home will be priced inaccurately.

In this example, there’s almost a 25% error (1,178 – 885 = 293 sqft error)! So let’s look at the magic price-per-square-foot difference. Option “A.” Let’s just assume a sales price of $150,000. $150,000 divided by 1,178 sqft equals $127.33 per-square-foot. Option “B.” $150,000 divided by 885 sqft equals $169.49 per-square-foot. If you were the buyer would you be upset? No agent prices their personal home based on the square footage details in tax records. Why are they so quick to do it for their clients? Hm…

How can a professional not see that twenty-five percent of the house is missing? In North Carolina, the Real Estate Commission set their error limit at 5%. Five percent is reasonable, not 25%. Yet the appeals court overturned the lower court’s decision and the agent and company were not held liable, and the consumer (that they claim to protect) lost huge. In what business is that fair?

That is real money to someone. A professional who truly cares about consumer protection understands the power of price-per-square-foot and would never price a listing without first having the home measured. In markets where they have discovered this to be true, homes sell faster and for closer to the list price. The MLS database in more accurate and it is a win-win situation for everyone. The Realtor® organization has spent a great deal of money fighting this issue, when they should have spent that money educating their members. I am hopeful that attorneys will find a way to stop allowing Realtors® to cheat home buyers and sellers, and shirking their responsibility of providing accurate square footage details. No agent has to personally measure a house. However, they must be responsible for providing accurate information in order to protect the seller and the home buying public. Inaccurate square footage, knowingly advertised, is a far cry from a consumer friendly business. This has gone on far too long and its time to put some professionalism back in the Realtor® logo. If not, they just as well close their doors and turn it all over to Zillow®.

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