Real estate clients and investors can become edgy when large sums of money are involved and let’s face it, for most clients, buying a house is often the single most expensive asset they currently or will own. As a result, real estate agents are particularly vulnerable to being sued.
Be proactive in protecting yourself and your real estate business by attending to these ten most common ways agents are sued.
- Not disclosing property defects and/or damages.
- Every property defect/damage should be fully documented. Defects/damages can include improvements made without permits, cracks, leaks, noise, construction issues.
- A client who sues an agent has to prove the agent knew or should have know about the defect(s) and should have disclosed any/all of them.
- Protect yourself by thoroughly inspecting the property and having the client sign a statement that documents their awareness of any property defects and/or damages.
- Any breach of duty is subject to a lawsuit.
- Document EVERYTHING.
- Most lawsuits center around property defects, dual agency, misrepresenting zoning/permit regulations, and breaching fiduciary duties such as accepting secondary offers while a counter offer is still pending.
- Representing clients in areas that are unfamiliar to you.
- Do the research…know the laws/requirements particular to specific areas.
- Offering legal advice.
- Giving tax/legal advice to clients is considered illegal in many states.
- Direct any tax/legal questions to a tax professional and/or an attorney.
- Exaggerating or misleading clients about home conditions/features/amenities.
- Breach of contract or non-compliance with contract terms and/or time frames.
- Identify ANY unclear clauses/terms in a contract.
- Get legal advice from YOUR attorney to ensure that all information is accurate and suggest that your client get legal advice from THEIR attorney.
- Not keeping your clients’ data safe.
- Hackers are everywhere and when they’re “successful,” you as the agent are liable.
- Install security software, keep all your paperwork secure, change your passwords frequently and have your data encrypted.
- Not recommending inspections.
- This is a no-brainer. At the minimum, recommend a general home inspection from a professional.
- Also recommend additional inspections for pools, septic systems, roofs, chimneys, septic tanks and mold.
- Negligence and fraud are not the same. Fraud involves intent; negligence does not.
- Get insurance coverage…you never know what a client thinks you ought to have known.
- Physical injury
- Any “accident” during a viewing may translate into your having to reimburse costs/damages due to that accident.
- Clean up and out any debris on the property, shovel the snow, melt the ice, etc.
- Injury can sometimes involve undisclosed mold problems.
- Get insurance coverage for unforeseen accidents.
Thanks to Ryan Ellis, an Errors and Omissions Specialist, writing for Inman News for source data.
Also read: https://timandjulieharris.com/2019/09/22/challenges-of-being-a-self-employed-real-estate-professional.html, https://timandjulieharris.com/2019/09/13/special-edition-podcast-jd-mcclintock-palm-beach-real-estate-top-producer-2.html, https://timandjulieharris.com/2019/10/03/nars-q2-2019-commercial-real-estate-trends-and-outlook.html