National Real Estate Exam (PSI)General Principles of AgencyMedium
A listing agent tells a prospective buyer, 'This is the best-built home in the neighborhood, and it will definitely appreciate faster than anything else on the market.' The buyer later feels misled after the home does not appreciate as quickly as similar homes. Which best describes the agent's statement?
- ANegligent misrepresentation due to lack of due diligence
- BFraudulent misrepresentation, giving the buyer grounds for rescission
- CPuffing, an opinion-based statement not considered actionable misrepresentation
- DA violation of the duty of disclosure of material facts
Show answer & explanationAnswer & explanation
Correct answer: C. Puffing, an opinion-based statement not considered actionable misrepresentation
Statements of opinion, exaggeration, or subjective sales talk about quality or future value, known as puffing, are generally not considered fraudulent misrepresentation because they are not statements of verifiable fact. Buyers are expected to recognize such claims as sales talk rather than guaranteed facts.
Why the other options are wrong
- A. Negligent misrepresentation requires a false statement the speaker should have verified as fact, not obvious sales opinion.
- B. Fraudulent misrepresentation requires a false statement of material fact, not a subjective opinion about quality or future value.
- D. Material fact disclosure involves known defects or facts, not opinions about future market performance.
Puffing vs. Misrepresentation
Puffing consists of subjective opinions, exaggerations, or sales talk that are not treated as fraudulent misrepresentation, unlike false statements of verifiable material fact.
- Opinions about quality/value are generally not actionable
- Misrepresentation involves false statements of fact
- Buyers are expected to recognize obvious sales talk
Memory trick: Puffing is 'talk,' misrepresentation is 'fact gone wrong'