Now that 2021 is well underway, it’s a good time to review any risks and vulnerabilities within your business. Here are 6 things that every broker should review to protect your real estate business:
1. ADA Compliance for Websites
A website is a valuable asset for any broker or real estate professional. But, do you know if your website is ADA compliant?
ADA is the American Disabilities Act. You may have heard about it in the context of accessible buildings and public spaces. Things like ramps, designated disabled parking spaces and handicapped bathrooms are examples of how organizations may try and make their facilities more accessible to those with disabilities. However, lawsuits about ADA compliance for websites are on the rise because websites are considered ‘public spaces’.
Many websites are not accessible for people who use assistive technologies due to a disability, such as deafness or blindness. Some website features simply don’t translate to those using screen readers or voice-assisted technologies.
Your business falls under ADA regulations if you:
- Operate 20+ weeks each year
- With a minimum of 15 full-time employees or those in the category of ‘public accommodation’, If you meet those criteria, you need to make sure your website is ADA compliant. One first step you can take is to:
- Include “alternative text” for every image on your website to describe the image.
2. RESPA Compliance
To ensure your brokerage is protected, review how your real estate agents manage ‘preferred provider lists’ and ensure all practices are RESPA compliant. The Real Estate Settlement Procedures Act applies to real estate brokers and agents, as well as other service providers considered ‘settlement services’. Typically, this includes professionals that provide services that occur before or at the time of purchasing a home, such as appraisers, home and pest inspectors, home warranty companies, title agents, and mortgage bankers or brokers.
RESPA prohibits real estate brokers or agents from receiving money (or other things of value) for referrals. Splitting fees for settlement services is also not allowed under the Act unless it’s a fee for a service provided.
There are some exceptions to RESPA’s directions under strict circumstances. If a real estate broker or agent has an interest in a settlement service company, it may be allowed if:
- The relationship is disclosed at the time of referral
- The broker or agent still provides clients with the freedom to choose an alternative service provider if they wish to do so.
The brokers or agents cannot receive any additional payments other than what is considered to be a return on investment for their ownership share. Payments cannot be linked to the volume of referrals.
For more resources about RESPA, visit the Consumer Financial Protection Bureau website.
3. Keeping Within The Scope of Your Expertise
Many lawsuits begin as a result of agents working outside the scope of their expertise. When fielding questions about a property, real estate professionals can sometimes feel pressured to answer every question. But, if the question is outside the expertise of the real estate professional, it’s best to just say that and encourage clients to do their own independent research on the matter.
Questions like these are common:
- “Do you think a mortgage broker will approve my mortgage?”
- “Is there much crime in the area?”
- “How much do you think it would cost to fix this?”
- “Is the electrical wiring ok?”
Provide your agents with regular and ongoing support and training to ensure they know not to operate outside the scope of their expertise (and the risks to them if they do). Encouraging all prospective buyers to do a building inspection before purchasing is one way to minimize risk. Real estate agents can also direct clients to other independent sources of information.
4. Listing Issues
Listing issues are a common reason for lawsuits. Review these most common listing issues with your real estate agents so they can protect themselves and your business from liability:
- Inaccurate square footage of a property
- Incorrect room sizes
- Real estate copy that overstates the property (for example, “room for a tennis court”)
- Incorrect zoning information
- Age of the house
Mistakes are amplified if using a Multiple Listing Service — the incorrect information can spread fast. It’s essential that your agents know that getting the information right the first time is critical to the success of your brokerage (as well as their career and reputation!). Check out our tips for avoiding a lawsuit when marketing listings.
5. COVID Compliance
The pandemic has changed the world, and compliance with the ever-changing landscape of COVID regulations is essential for business success. COVID compliance needs to be reviewed regularly. As a broker, you need to be alert to changes and communicate these effectively to your team.
To assist with compliance, your brokerage should have at a minimum:
- COVID-safe practices in place so your agents can show properties safely and minimize risk
- Resources for your agents, such as hand sanitizer and masks where necessary to keep everybody safe
- Social distancing practices in place
6. Risk Management Framework
Review your risk management framework and how your brokerage manages risk to protect your business. A comprehensive risk management framework identifies existing and potential risks. It details how risks will be dealt with if they arise and how risks are measured and monitored.
Having a solid risk management framework is key to your brokerage operating proactively and not reactively. It will also help you reduce your liability and risk of lawsuits when you can identify problems before they become lawsuits. When you have CRES Real Estate Errors and Omissions insurance for your brokerage firm, you’ll have access to expert pre-claim legal services 7 days a week.
Reviewing your insurance is also a positive step towards effective risk management. We’ll help you identify the right coverage for your business. And if our policy isn’t the best fit, we’ll even shop to find the best policy for you.
From E&O to Business Owner’s Policies, you can contact the real estate insurance experts at CRES at 800-880-2747 for a confidential discussion today.