Coming off the challenges of the pandemic, your real estate business may now be booming. With some real estate professionals feeling there aren’t enough hours in the day, could things fall through the cracks — or some best practices fall by the wayside — and cause problems for your business?
You’ve handpicked your team. You have faith in them, and in the training you’ve provided. But in booming markets, real estate licensees may do whatever it takes to take advantage of that market.
As a broker, do you REALLY know what your real estate licensees are doing?
The pandemic has also brought less face time, with many real estate professionals working remotely or from home. So, this is another challenge for brokers when it comes to managing a team of real estate agents.
What Can Go Wrong?
At CRES, we’re seeing a dramatic increase in claims where real estate licensees are doing business that is not condoned by their broker. More and more, real estate professionals are getting involved in activities outside their real estate firm without their broker’s knowledge or consent.
In one recent claim, a real estate licensee was sued while engaging in Property Management. During discovery, we found the licensee used the company’s letterhead to help obtain leads and operate the business, without their broker’s knowledge.
In most cases, as a broker, you are liable for your agents’ activity, whether you know about it or not.
In this particular case, the broker did nothing wrong. He and his business were still slapped with $300,000 in legal fees.
Here’s another example…
A real estate agent decides to sell a client’s home to a family member. He acts as the seller’s agent and buyer’s agent, but his broker is unaware of his actions.
The agent presents an offer from his family member to the client, but fails to present another offer from a third party which is $10,000 higher. The agent deliberately withholds the offer so his family member can purchase the home. The sale goes through and the seller is unaware, until he runs into the person who submitted the offer that was never presented.
The seller then sues the agent AND the broker for breach of duty, because the agent arranged a deal that benefited their family and disadvantaged the seller — who could have gotten more for the property.
How to Minimize Risk and Keep Your Team On Track
So, how can you effectively manage your team while minimizing your risk?
Focus on recruitment to get the right people
It’s more effective to recruit the right people, than deal with the bad behaviors of the wrong people (and the fallout their behavior might cause your clients and business). Identify what qualities, experience and skills you’re looking for in your team and focus on getting your recruitment process right.
A good broker/agent agreement is crucial
Make sure you have language in your broker/agent agreement that addresses agent activity outside of the company. Detail in the agreement what is acceptable and what is not. The agreement should also list reasons for termination, so it’s very clear what the consequences are for unacceptable behavior.
Update your Company Policy and Procedures framework
If you don’t already have a Policy and Procedures framework, it’s time to develop one. The purpose of this framework is to guide your team, with detailed information they can use to navigate through their employment. Some common policies that brokers have in place are:
- Limitations on use of company assets (physical and digital, such as letterheads etc)
- Fraud policy
- Code of conduct
- Customer service policy
- Fiduciary duty policy
- Complaints and Misconduct policy
Communication and training are key
There’s no point in having policies in place if you don’t effectively communicate them to your team. Provide all new staff members with the Company Policies and code of conduct, so they know what they’re signing up for.
Conduct regular refresher training for your team. Keep them aware of your expectations, as well as other potential ethical challenges or conflicts of interest that may arise.
Check your insurance
Having the right insurance is essential, so you can protect your real estate business from lawsuits. At CRES, we’ll find you the best real estate Errors and Omissions protection for the best price. And we’ll ensure that your policy is tailored to your specific risks. . We can also find you the right Business Owner Policy (because we have access to more product options than just about anyone else.)
With all CRES policies, you’ll have access to qualified attorneys who can give you legal advice 7 days a week.
Contact the team at CRES at 800-880-2747 for a confidential discussion.