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Real Estate Broker Beware — Most Common Complaints That Lead to Litigation

If you’re a real estate professional, it’s important you know how to detect and eliminate the most common errors and omissions. In a recent webinar, James M. Meseck, a litigation specialist from White and Steele in Colorado, gives us tips on reducing the most common risks.  He covers the most frequently litigated issues and licensing complaints, along with problem-solving strategies and litigation defenses. (Note that all real estate professionals in Colorado are referred to as “brokers”, so this discussion applies to everyone selling real estate.)

In the Real Estate Broker Beware Webinar, we hear that now is the best of times and the worst of times to be in real estate.  Real estate offers incredible opportunities to real estate professionals everywhere. The market is healthy with stable home values. Unfortunately, litigation and licensing complaints against real estate professionals are exponentially increasing.

Most Common Complaints

According to James M. Meseck, the most common complaints are about:

  • Septic systems
  • Solar leases
  • Water intrusion and/or mold
  • Water rights
  • Failure to review and correct Seller’s Property Disclosures
  • Agent-owned property and additional supervision
  • Incomplete and duplicate contracts
  • No permits
  • Easement errors
  • Mineral rights
  • Failure to review or recommend survey
  • Contract drafting
  • Failure to review title
  • Loss of earnest money

Inaccurate Information provided to a buyer is also a common complaint. Attention to detail is key throughout the transaction to ensure your risk is minimized. It’s important to note that it’s not only inaccurate information which can be an issue, but also information not disclosed — such as flood or fire risk, nearby fracking activity or other industrial activity. If you know about it, it must be disclosed to the buyer.

Complaints often arise about inaccurate square footage of a property. real estate licensees should take particular care to ensure that any floor plans or measurements given to the buyer are true and accurate to avoid litigation after the property purchase is complete.

Misleading photos or information in the multi-listing service (MLS) is another common complaint. This can include situations where an incorrect photo is uploaded to the MLS.  Or it could be that photos are edited into a state where they no longer represent a true and correct representation of the property.

A lack of knowledge about local or neighborhood-specific issues is also a complaint often seen in real estate. Sometimes purchasers find out things about the neighborhood that they do not like post-purchase — for example, a new road development. Keep in mind, as a broker or agent, anything that can materially affect the value of the property needs to be disclosed. So, if you know a new freeway is starting construction right next to the home, you need to disclose this information. For more general local or neighborhood information, you should refer buyers to other sources of information, such as the local county office.

Key Takeaway

One of the key takeaways of the webinar is that problems are inevitable.  It’s how you deal with these issues and solve these problems that’s important. As real estate professionals, you have the knowledge, information, skills and experience to identify, limit and manage your risk.

Your real estate E&O insurance should be tailored to your specific activities and risks, to be sure your business is protected.  CRES specializes in real estate E&O, and can tailor a policy to include superior coverage, as well as the specific-to-real-estate protections you really need.

Would you like to know more about how you can protect your real estate business from future lawsuits?

You can watch the full webinar replay here:

If you are a Colorado real estate firm or firm + brokers in need of coverage, click here.

If you are an individual Colorado broker looking for personal coverage, click here.

Or select your state and type of policy.

You can also call CRES at 800.880.2747 to speak with one of our friendly team members.  We’re happy to customize an E&O policy tailored specifically to your real estate business.

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