Types of Fraud

Actual fraud

Actual fraud is an intentional misrepresentation without any regard of the actual facts or their suppression. It can also be a promise made without any intention to follow through with that promise. Essentially, you are straight up lying.

An example would be if an agent told a buyer that the roof of a property was completely fine when he knew full well that it was not OK at all. It would also be actual fraud for the agent to say, "Do not worry about the roof; if you buy this house I will personally fix it, you have my word," when he did not have the ability or intention of fixing it.

Negative fraud

Negative fraud is lying through omission. This occurs when somebody does not disclose a material fact to somebody in an effort to get them to enter into a contract that would put that person in a bad situation with respect to money, damage, or even personal harm.

An example would be when if an agent was showing a home with roof problems and the client asked, "Are there any issues with the structure of the roof?" and the agent replied, "Have I shown you the basement?"

Constructive fraud


Constructive fraud is lying without knowing you are lying. There does not need to be intent to deceive somebody.

An example would be if an agent was showing a home with roof problems and the client asked, "Are there any issues with the structure of the roof?" and the agent replied, "No, it's fine, the roof is great." The roof had problems, but the agent authentically thought the roof was fine.

When this occurs, you may hear the agent say, "Whoops, my bad."

Negligence

Negligence is the omission to perform a duty or the failure to exercise a standard of care that a reasonably prudent person would have exercised in a similar situation. Negligence is typically due to a lack of time, forgetfulness, or just plain laziness.

For example, if an agent was listing a property and there was a question regarding the zoning, the agent should contact the zoning office. Usually, this can be determined by a phone call or checking the website. If the agent knew that there was a question regarding the zoning of a property and did nothing, the agent could be found guilty of negligence.

Fraud may take the form of either misrepresentation or negligence. In either case, the agent may be liable civilly for damages incurred by the purchaser on account of the misrepresentation, or the agent may be subject to disciplinary action against the agent's license.

The owner may be vicariously liable for damages for the agent's misrepresentations, even where the owner was not the source of the erroneous information conveyed to the agent.