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Expanding Your Real Estate Services? Don’t Forget to Expand Your E&O to Cover the Risks

Have you expanded your real estate services since you last renewed your real estate E&O insurance? Are you sure you have coverage for everything you’re now engaged in?  (If you have a “generic” E&O policy used for many industries, you may not be covered for many of your real estate activities.)

Changes in real estate business models and how buyers and sellers engage has pushed real estate agents and brokers to expand their service offerings over the past 10 years. Unfortunately, that growth has led to an increase in real estate lawsuits. So as your business activities expand, so should your real estate E&O — to keep your business protected adequately. Here’s what to consider to help reduce your risk of real estate claims.

Does Your Current Real Estate E&O Cover That?

When adding new real estate services to your business, consider how they could increase your claims risk. Do you know if your current real estate E&O policy covers your new activities? Specific activities covered vary by policy — as well as by state. Depending on what new services you’re considering, you may need to expand what your E&O policy covers.

Typical additions to an E&O policy include coverage for:

  • Conducting open houses, showings and other activities (Open House and Showings Coverage) — yes, if you don’t have this specific coverage, you could be liable for injuries or damage
  • Appraisal activity
  • Property Management activity
  • Mortgage Brokering services
  • Commercial activity (not all E&O policies cover Commercial in their base policy)
  • Business conducted in another Mandatory state (Conformity Endorsement for Mandatory States)
  • Selling personally owned property (Agent-Owned Property coverage)
  • Increased sales or property values (increasing policy coverage limits to ensure you have enough coverage to pay for an E&O claim)

As a broker, if you add agents to your team, you’ll need a company E&O policy.  And you should also consider a  Business Owner’s Policy.

Before you renew your real estate E&O, be sure your policy covers you for all of your current activities.  When you work with a real estate E&O specialist like CRES, your policy can include coverage for each of the options above. And you can customize your policy for your specific activities, so you only pay for what you need.

Know Real Estate Laws and Requirements for New Services

As you set up new service offerings, ensure you and any team members know what new processes you may need to follow to reduce risk of a real estate lawsuit. Depending on the product or service, this can mean filing the right paperwork, documenting conversations, or adhering to certain laws, code of ethics, or regulations. You may need to:

  • Review state requirements for new product offerings
  • Review guidelines provided by your firm
  • Make sure you have the necessary forms required to document each transaction or service
  • Review national and local laws applicable to your new transaction or service

This information can be researched through your local real estate association or through the United States Department of Justice website. You’ll also find sample letters, disclosures, and Legal Updates in the CRES Resources pages.

Get Professional Real Estate Legal Advice

With every new service, there are aspects that increase liability and claims risk. Guessing how to adequately complete a form, file a contract, or conduct a transaction is going to greatly increase your risk of a real estate lawsuit. Consult with your real estate attorney to learn how to avoid these risks and claims in advance.

CRES real estate E&O + ClaimPrevent® comes standard with expert pre-claim legal services.  You’ll have on-call access to local real estate litigation attorneys to help you during and after transactions, to prevent small issues from becoming claims. If your E&O doesn’t offer this service, contact CRES today.

What services have you added to your business that required a change in E&O? (Or are you wondering if you need additional coverage for something?) Share your story or questions with us in the comments below!

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