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Finger Pointing Law

How Accidentally Saying the Wrong Thing Can Lead to a Real Estate Lawsuit

Accuracy matters in real estate. A licensee can accidentally say the wrong thing and cause a lawsuit. Here are some things to watch out for to avoid a claim. 

Be Cautious When Responding to Questions About a Property

A big part of a real estate licensee’s job is to answer questions about properties, but there’s a need for caution. Licensees should carefully consider every response, to ensure it’s factually correct and not misleading. “Answering questions is easy ”, you might be thinking. But clients and buyers can ask questions outside of the scope of your expertise, and that’s how good real estate professionals can become embroiled in nasty lawsuits. Here are some common questions and mistakes…

Questions About Property Lines

Say, for example, a potential buyer asks you about property lines. Many might just look at the fence line and say that’s where the boundary is. But, that’s not always the case. Boundary disputes are very common, especially in areas with large land parcels, where property lines are much less obvious than in metro areas. Sometimes older homes have haphazard property lines agreed to decades ago that new owners may not be aware of. The only way to be sure about property lines is to complete a property/land survey and a full title search. And that’s what you, as the real estate licensee, should suggest to the potential buyer. If a boundary line issue is determined, the client or buyer should seek legal advice from a qualified real estate attorney. That issue is outside of the scope of your expertise as a real estate professional. 

Questions About Views

Imagine you’re selling a gorgeous luxury home with tremendous views. Right now, the view is unobstructed. What do you say if a buyer asks you if the view could be obstructed in the future? Be cautious in your response. You don’t know if there are any CC&Rs in effect that may or may not restrict the ability of properties below to build up. Or even if there aren’t any current planned developments that you know of, there could be in the future. Instead of accidentally reassuring the potential buyer how unlikely it is that they would lose their beautiful views, refer them to independent sources of information. For this type of question, referring them to the County Planning Department would be the best course of action. 

Questions About Materials Used in the Home

As a property expert, you might have a good handle on building materials and be able to quickly identify materials in a home. But, if asked by a potential buyer about building materials, only provide information if you’re 100% positive. Can you imagine how unhappy your buyer will be if you tell them the bench tops are Italian marble when they are actually a cheaper lookalike product? A real estate licensee’s opinion is no substitute for an independent building inspection. Recommend potential buyers do their own due diligence and seek a building inspection. This way, they can be 100% sure about the materials used and be fully aware of any defects or issues with the property. 

Avoid Estimations

Often buyers are looking at the potential of the home. They may wish to install a tennis court or a pool or do other renovations to extend the living space or outdoor area. Even if you’re an avid tennis fan or swim like an Olympian, real estate licensees should not be drawn into estimations about measurements, space, and ‘what-ifs’ when it comes to these potential improvements. 

“Is there room for a tennis court?”

“Do you think I can fit a new pool here?”

These are very common questions. But, bad estimations can be a fast track to a lawsuit in real estate. Instead of responding with a guess or estimation, recommend the potential buyer do their own independent research to see if these things are possible. 

Discussing Things Outside Your Control

With land availability limited, many buyers are looking for redevelopment opportunities to create their dream homes. A potential buyer might ask about adding a second story or extending the house. A response like, “I think that should be fine — a second story is a great idea!” are bound to get you in hot water. Steer clear of specifics and direct your potential buyers to other independent sources to help with their remodeling decisions, such as:

  • Builders/Building Inspectors
  • Qualified professionals that can provide expert advice and quotes
  • The County Planning Department or other government bodies to check about any potential building restrictions or potential compliance issues. 

Check Your Insurance Coverage

Accidentally saying something wrong can mislead potential buyers and influence them to make costly decisions (potential mistakes if the information was inaccurate). 

Will your insurer cover you if you accidentally say the wrong thing and end up facing a lawsuit? Having the right real estate E&O insurance coverage is important for real estate licensees. It minimizes your liability and protects yourself and your business if a lawsuit arises. 

With CRES E&O Insurance, you can be sure you’re getting the best protection at the best price (because we have access to more product options than just about anyone else).   And with all CRES policies, you’ll have pre-claim access to expert real estate  attorneys. Our legal team will be able to answer any risk management questions you may have, 7 days a week. 

Contact the CRES team at 800-880-2747 for a confidential discussion today.

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