Managing the Real Estate Buying and Selling Process in Unpredictable Housing Markets

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Real estate is a dynamic industry with ever-changing market conditions. This unpredictability brings with it significant risks and many potential issues for real estate professionals. Let’s take a look at what pitfalls you should watch out for and what you can do to protect your real estate business. 

Current State of the Industry 

Some commentators predict the US economy could take a nosedive in less than 5 years after a decade of strong performance and growth. Real estate company, Zillow, predicted in 2018 the crash could happen as early as 2020. Every quarter, Zillow surveys 100 economists and real estate industry experts and asks about their housing market predictions. Zillow®’s recently released data for the second quarter of 2019 paints a slightly less dramatic picture. 

While a collapse of the housing market severely affected the US economy in 2008-09, most survey respondents think the housing market will have less of an impact on the national economy this time around. Nevertheless, the industry is bracing itself for change.

The LA Times reported earlier this year that the Southern California real estate market was experiencing a “sustained slowdown” as a result of the high cost of housing. September 2019 figures showed a slight uptick in activity as a result of reducing interest rates and lower inventory. 

Despite this recent data, the California Association of Realtors® has cautioned that many factors still threaten to negatively impact growth. These factors include an uncertain economy, constraints in supply and housing affordability issues, which all affect the demand for property. 

How Uncertainty Can Affect the Buying and Selling Process

Uncertainty in the market can cause hesitation or inaction among home buyers. That can lead to stagnating property sales and risks to sellers, buyers and real estate professionals.

As a real estate agent, it’s essential during times of industry uncertainty to protect yourself from potential liabilities. Persuading buyers to take the leap to purchase a property is more difficult in an uncertain real estate market, but when trying to boost their confidence to buy, be sure you don’t overstate market conditions. If you do, you might be facing a lawsuit for misrepresentation or misconduct. 

Tips to Avoid Liability in an Uncertain Real Estate Market

Don’t speculate about the market
When trying to persuade buyers to purchase, stick to the facts and property features, rather than speculating about the investment benefits, possible resale values, or market conditions. In uncertain economic conditions, lending practices can also vary. It’s best to refer clients to banks and finance professionals before speculating on issues outside of your scope of expertise. Otherwise, you can find yourself in hot water and facing a lawsuit. 

Refer clients to independent sources of information
Instead of providing market information yourself, refer clients to independent market research and data which can help them make their own informed decisions. For example, when a client asks about potential resale values for a property, be conservative in your approach.  Refer to recent sales information from other sources, and be sure to say the market fluctuates and there are no guarantees. 

Useful sources include:

  • The California Association of Realtors® releases monthly information about sales and price statistics and quarterly housing affordability data. 
  • The National Association of Realtors® regularly publishes housing indicators and a US Economic Outlook forecast. 
  • Zillow® publishes housing metrics, including values, listings, sales and forecasts for the industry.

Add disclaimers
If you plan to use any data about the current market conditions in your promotional materials, cite the source — and ensure you include a disclaimer to protect yourself from liability and lawsuit claims on the basis of misrepresentation or misconduct.

Insurance Protection for Real Estate Professionals

If you have inadequate protective measures in place to protect your real estate business, the costs can be significant — financially and to your reputation as a real estate professional. 

Your Real Estate Errors and Omissions policy can protect you and your business should a dissatisfied client make a claim after a real estate transaction. 

When you purchase a CRES E&O + ClaimPrevent® policy, you’ll also get expert advice 7 days a week at no extra charge from experienced, qualified attorneys. So you’ll be able to resolve problems before they become lawsuits — preventing claims and reducing the cost of claims that do occur.

Contact the CRES team today at 800-880-2747 for a confidential discussion. We can tailor an insurance solution specifically to your needs, so you can be confident your business is protected in the uncertain housing market. 

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

Originally Published January 8, 2020

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