In our litigious society today, real estate agents like you need to protect yourself against potential risks and lawsuits. One scenario where you face a high degree of risk is when you provide information and data to your clients. There are plenty of good reasons why, as a real estate agent, you would provide information and data to your clients. They may have questions about the neighborhood, previous sales in the area, suggestions about making improvements to their home… But, keep in mind, all information and data you provide, no matter how well-intentioned, can have consequences which you need to be aware of.
1. Don’t Provide Information And Data Outside Of Your Scope Of Expertise
Real estate agents need to act with caution to ensure you don’t go outside the scope of your expertise. Otherwise, you may find yourself facing a lawsuit and, even worse, your current insurance may not cover you.
Do not provide advice or recommendations, or answer questions regarding tax or legal issues, which are best answered by a qualified accountant or lawyer. Know your limitations and don’t provide comment on issues that fall outside of your area of practice. Learn more about why you should never answer tax questions
Where your client needs to engage another professional expert, for example, a building inspector, avoid providing recommendations about who they should use. If you do provide suggestions of any sort, ensure you provide more than one option and make it clear IN WRITING that it is the clients’ responsibility to choose an option which best suits their circumstances. Learn more about avoiding real estate referral lawsuits
2. Refer Clients To Independent Sources Of Information
It’s not uncommon for a potential buyer to inquire about the neighborhood — what are the crime statistics? What is the potential for capital gains? What developments are occurring in the suburb which could impact on the future sale of the property?
Where possible, provide the potential buyer with links to independent sources of information. Local councils have a wealth of information about neighborhoods and communities, police keep statistics on crime, and property reports on recent sales in the area should also be available. All of these sources encourage the prospective buyer to look deeper themselves before making their own informed decision about a property purchase.
Providing links to data and information is always preferred from a risk management perspective, rather than incorporating someone else’s information into your own agency marketing and communication materials — including your website and newsletter.
3. Use Disclaimers
Where you’re using data obtained from third parties on your printed marketing materials, state the source of the data on the published item. Also use a robust, standard disclaimer clause on any information you distribute as part of your real estate business. Make it clear in your disclaimer that the information is provided by a third party, and you have not checked the accuracy of the information.
This data and information was obtained from [insert source of information]. [Insert Business Name] has not verified this information, and makes no guarantees about the accuracy of this information. Further, we accept no responsibility for any liabilities caused as a direct result of you using this information. All clients are encouraged to undertake your own due diligence to verify the accuracy and relevancy of any data and information you use when making any decisions regarding property purchases or investments. We encourage you to obtain independent, expert advice when making such decisions.
4. Stick To The Facts Of The Property
In your communications with your clients — both written and verbal — avoid exaggerated language and overstatements about the property’s features. Statements like these should be avoided:
“This property has an enormous backyard and room for an Olympic sized swimming pool”
“The best views in town”
“The biggest kitchen you’ve ever seen”
“An extraordinary sight to be seen”
“Guaranteed, a great investment!”
Keep property descriptions realistic and stick to the facts, so you don’t find yourself facing a lawsuit for inaccurate statements about a home.
Never make assumptions about what’s possible when talking with potential buyers. They may ask about adding on, remodeling, moving walls, adding features, or preserving views. It’s not your job to be a licensed contractor. And if you haven’t reviewed any CC&Rs that may apply to the property with the buyer, don’t make any assertions that may be incorrect.
Claims against real estate agents often arise not because of the information and data provided, but rather due to information and data which has not been provided. Disclosure issues can arise if a real estate agent:
- Fails to communicate information which they know about the property, which can materially affect the property value (for example, defects or structural issues).
- Communicates false information
Ensure you follow the disclosure laws in your state to avoid a lawsuit on the basis of negligence, misrepresentation, breach of contract or fraud.
6. Obtain A Tailored E&O Insurance Policy
The best way to avoid the negative impacts a lawsuit can bring is to ensure you have adequate insurance protection. With CRES E&O + ClaimPrevent®, you can customize your policy specifically for the real estate risks you face in your business. Legal advisory services are included 7 days a week, so you can obtain legal advice whenever you need it. CRES’s highly trained team of attorneys can help you to resolve any issues that arise before they become lawsuits.
To find out more, call us at 800.880.2747 or get a quote online (select your state in the right column).