Plumbing Problems? How to Avoid a Real Estate E&O Claim

Flooded living room plumbing problems

Have you ever been in this situation? The inspection looked good, but it turned out there were major problems that went unnoticed. When the buyers found out, they were understandably unhappy.

If this happened to you, do you know what to do to help your client and avoid a real estate E&O claim?

Recently, a real estate agent contacted CRES ClaimPrevent® Risk Management Services with this situation. The agent represented a buyer in a transaction where significant plumbing issues were not identified in the first inspection and weren’t discovered until after the close of escrow.

“What can I do to help my client?” the agent wanted to know.

The CRES Risk Management Legal Team advised him of his various options and offered these suggestions:

  • Approach the sellers and inspector directly to see if something could be arranged to fix or pay for the plumbing issues
  • Directly pursue mediation or litigation

One thing the agent was advised not to do is give legal advice to his buyer client. Our attorneys advised the agent that giving legal advice to his buyer client would increase his liability in the situation and put him at greater risk of a real estate E&O claim.

To avoid potential liability in the future, the attorneys also advised that the agent should keep a complete file regarding the inspection, including written notes and copies of any objections and resolutions. Should a claim arise, the agent would be prepared with detailed documentation.

You may not face this exact situation, but you can still benefit from these takeaways:

  • Don’t give legal advice to your clients.
  • Do contact the seller party to see if a solution can be reached without legal intervention.
  • Do keep detailed written records so you are prepared if claims arise.

And if you are a CRES client, call the CRES Stress Less Real Estate Legal Hotline at the first sign that there may be an issue. You can reach us at 877-273-7467; we’re here even before you have a problem. The sooner we know about potential issues or legal questions, the sooner you can get help and advice to help you avoid a real estate E&O claim.

Not a CRES client? Learn all about how the CRES ClaimPrevent® Risk Management Program helps protect you.

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.

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