Lawsuits can do serious damage to your reputation as a real estate professional. It can be expensive to defend claims, and it could cost you your business. So it makes sense that you should try and fight claims before they happen. Here’s how…
Keep a Transaction Log and Document Everything
No doubt you’re juggling multiple clients and transactions. Keeping a transaction log and a good filing system is a great way to keep on top of things. It will also be a useful record if you ever need to prove anything in court, because often the outcome of a lawsuit against a real estate licensee comes down to a “he said/she said” scenario. If you have written documentation to tell your side of the story, your documents could sway a jury in your favor.
What Your Transaction Log Should Include
Your Transaction Log should include details of any telephone conversations you have with your clients regarding transactions. Note the date, time, who you spoke to, what you discussed, and any key outcomes or actions that came out of the conversation. Even better, after you finish the conversation, send a quick recap via email to ensure there’s a written record.
Keep in mind that while noting a record of conversation can help in court, some things are better in writing from the outset. When dealing with offers and acceptances, or other directions from your clients, get them in writing to protect yourself and minimize your risk.
When important events such as inspection reports come in, keep these as part of your Transaction Log. It’s not only useful if you need to refer to this documentation in court, but it’s also incredibly helpful if you’re asked any questions about the property. So often, real estate professionals find themselves facing a lawsuit because they inadvertently say the wrong thing. Your Transaction Log can help prevent that from happening.
Details of any other reports and important correspondence should also be kept in your Transaction Log. This means any time you provide a document to your client or a third party and obtain a signature of a receipt, put this in your Transaction Log in case you need it later.
Keeping Your Transaction Log Organized
You should write and organize your Transaction Log in chronological order. This is very important if you ever need to use your Transaction Log in court. If you enter information about something at a later date (for example, after you receive a demand letter), you may give the impression you’re recreating a version of the event simply to support your position.
For example, a licenseet provides his client/seller with a Seller’s Disclosure Form to fill out as a part of the listing process. The client contacts the licensee and tells him the form is confusing, and she needs the licensee to help her fill out the form. After informing the client that she must be the one to fill out the form, what should the licensee do immediately afterwards to avoid potential litigation and why?
Answer: The real estate professional should then immediately enter in his or her log in chronological order the date and a narrative of what occurred. It wouldn’t be unusual for a seller being sued for failing to disclose a defect in the Seller’s Disclosure to allege that the licensee helped her fill out the form, and she was just following the licensee’s directions. Being able to present the chronological Transaction Log of your version of what happened could assist the court to believe your version of the facts.
There’s No Protection Like Insurance
Even real estate professionals with the best of intentions can find themselves embroiled in a lawsuit situation. Quality Errors and Omissions insurance coverage is essential for real estate professionals. Not all E&O insurance is created equal. You don’t want a generic policy used for many industries; you need protection for specific-to-real-estate risks.
CRES specializes in insurance for the real estate industry (and has for 25 years).. Insurance packages can be customized to suit your needs. CRES E&O Insurance + ClaimPrevent® policies also offer easy access to qualified attorneys who can provide you with legal advice 7 days a week.
Contact the CRES team at 800-880-2747 today for a confidential discussion, or Find Your real estate E&O Solution.