March 26, 2010
Property owner loses suit over bad ad photo
By ANDREW BERGH
Special to the Journal

That #@!!% aerial photograph cost me half a million bucks!

Though not an exact quote, this maybe reflects what Geoff Boguch was thinking after he closed escrow on his Lake Washington waterfront property. The next round? His lawsuit against the real estate agents who used a misleading photograph to advertise his Hunts Point lot, which then took over three years to sell.

Boguch's efforts to sell his waterfront began in February 2001, which is when he hired two agents, including Wendy Lister of the Landover Corp., to post his property on the Northwest Multiple Listing Service. Before the parties signed a contract, Lister told Boguch he should expect to sell the property for about $3.5 million. Given this input, Boguch followed her recommendation to list the property for $3.85 million.

After six months elapsed with nary a nibble, Boguch agreed to drop his asking price to $3.475 million. The response? Dead silence for six more months.

In March 2002, the agents posted an aerial photograph of the property on the MLS Web site.

Unfortunately, the photograph contained superimposed lines that inaccurately depicted the property's boundaries. Instead of showing the lot to be roughly the shape of a parallelogram, the photograph indicated that one of the boundary lines along the length of the property ran in a “jagged fashion,” meandering toward and away from the center point. This made the property look “unevenly narrow” at certain spots, made the length of the shoreline look shorter than it actually was, and gave the mistaken impression that certain foliage with view-obstructing potential was located on adjacent property.

For the next two years, the listing sparked virtually no interest.

In either late spring or early summer of 2004, Boguch was contacted by Art Whittlesey, another agent at Landover, who said he had shown the waterfront to a developer who decided that he didn't want to buy it.

It was during this conversation that Boguch first learned about the inaccurate aerial photograph on the Web site, and he later informed his agents. Although they removed it right away, Boguch let their contract expire at the end of July 2004. The next month, he reduced the price by $80,000 and listed the property with Whittlesey for $3.395 million.

Six months later, Boguch at long last received a firm offer for the property. After striking a deal for $2.975 million, the parties closed escrow in April 2005. So after all the dust settled, the final sales price was $500,000 under the listing price when the flawed image — some 38 months earlier — first appeared on the MLS website.

Boguch's next order of business? To sue his agents for damages in King County Superior Court. If the defendants hadn't negligently posted the inaccurate aerial photograph, claimed Boguch, he would've sold the property sooner and for a higher price than he eventually did.

Shortly before trial, the agents moved for summary judgment.

The suit should be dismissed, the defendants said, because even assuming they had been negligent (which they denied), Boguch couldn't prove that he otherwise would've fetched a higher price for the waterfront. When the trial court agreed, Boguch found himself on the wrong side of an appeal.

According to Boguch, the evidence showed that the erroneous boundary lines in the photograph posted on the MLS had triggered a “vicious cycle of reduction” in his property's market value. By making the parcel look overpriced, prospective buyers were deterred from making offers, which in turn caused the property to sit on the market longer because other prospective buyers assumed it was overpriced. So the longer his property sat on the market, Boguch argued, the more difficult it became to sell.

This argument was not farfetched, as Lister herself confirmed at her deposition that buyers often view properties that sit on the market for a long time to be “risky investments.” She also acknowledged that nowadays internet advertisements are “vital” to the marketing of real estate.

But at the end of the day, a Washington appeals court recently said Boguch's theory was simply that: just a theory.

The fact of the matter, said the court, was that only one person — the developer shown the property by Whittlesey — had expressed “even the slightest interest” in the land before it was finally sold to the eventual buyers. Moreover, the developer had “remained uninterested” in the property, the court noted, even after learning the boundary lines had been wrongly portrayed.

In short, since Boguch could identify no prospective buyers who were willing to pay a higher price for the property but were deterred from doing so by the misleading internet listing, the appeals court ultimately ruled that his damages claim was “speculative” — and that his lawsuit had therefore been properly dismissed.

But before Boguch gets too upset about his court loss, he might want to consider how real estate values have plummeted during our wonderful recession.

In fact, if anyone is crying in their beer right now, it might be the buyers who paid almost $3 million for his Hunts Point waterfront.