Don’t let a simple inquiry escalate into a real estate E&O claim
You see the email pop into your inbox, or the receptionist tells you there’s an attorney on the phone. It’s a real estate lawyer, and they have some challenging questions for you.
Don’t panic. Here is what you need to know before you respond to their inquiry.
Why Would a Real Estate Lawyer Contact You?
In most cases, you probably didn’t expect a challenge worthy of a lawyer’s involvement to come up after closing. The lawyer might be coming to you on behalf of the buyer about a problem with the property that has only now been discovered.
These problems could include asbestos, substandard or unpermitted construction, infestations, mold, leaks and septic problems. You can learn more about how these issues can lead to real estate E&O claims here.
As the seller’s agent, it’s your duty to disclose any such problems if you know about them, and to make sure the seller includes all known issues with the property in the disclosures.
As the buyer’s agent, it’s your duty to encourage them to get all necessary inspections done on the house. If they decline an inspection, make sure you have the paper trail to prove you recommended it.
Another reason a lawyer might want to question you is a failure to keep a client’s information secure. A security breach resulting in theft or accidental disclosure of social security numbers, names and addresses, bank account numbers, and financial information is one of the top claims made against real estate agents today.
A security breach could come from a few sources, but is mainly due to a physical theft, an email or system hack, or an access issue. Implementing best practices for handling electronic data should be a top priority.
Even if you documented disclosures, notified clients to get inspections, and did everything right, a dissatisfied party could still involve you in a real estate lawsuit to try to gain compensation for perceived wrongdoing.
Knowing in advance how to approach a response will be your biggest asset to prevent an E&O claim.
What To Do Before Responding to Questions From A Real Estate Lawyer
Your goal in the phone call or initial email is ONLY to gather information calmly. If you are contacted by phone, ask the attorney to follow up with an email confirming the information needed. That way, you can respond by email and ask your own questions to gain as much detail in writing from the lawyer as possible. What transaction is the inquiry about? What is the specific challenge or issue? When was the issue discovered? Do they have specific documents that are being referenced? Can they provide copies to you? What is the person making the claim seeking? Gather information and advise the attorney you will get back to him or her.
You may have represented the person the lawyer is representing, or acted as the agent for the other party in the transaction. Make sure they have approached the right representative. There are cases where individuals are mistakenly mis-named in a real estate lawsuit, and you should not be involved at all.
Once you have the basic details, you can search your transaction records and review your documents, emails and other communication notes around the sale. This is an important step in determining what facts you have relating to the issue prior to responding.
And before you respond to questions or even request further clarification details, consider consulting your own lawyer. If you’re a CRES member, your first call should be to our ClaimPrevent® hotline included with your real estate E&O.
Once you’re ready to respond, there are steps you can take to reduce the risk of the inquiry becoming a lawsuit.
Five Tips to Keep an Attorney’s Inquiry From Escalating
Before, and when, responding to an attorney inquiry, follow these five tips:
- Act professionally and keep emotions in check. This isn’t personal. An angry or defensive response is only fuel that will be used against you should they take a claim further.
- Review your documents on the transaction and have them on hand when creating your response. Sometimes the sale occurred years earlier, so it’s good to review and refresh your memory on the transaction and any disclosures or issues discussed.
- Get legal advice. Contact CRES ClaimPrevent® legal advisory hotline, 7 days a week. Local attorney support is included with your CRES Real Estate E&O policy to answer questions and draft responses on your behalf, so you won’t have to handle a stressful situation like this on your own.
- Stick to the facts. Answer only what you are asked with concise, short factual statements backed by the documentation you have. Don’t volunteer additional information or answer questions you weren’t asked. You may unwittingly open the door to further queries. (This is one reason why you want to respond by email. You’ll have a written record of everything, and you’ll have time to consider your response — and have it reviewed by a CRES ClaimPrevent® attorney before sending it.)
- Don’t assume anything, and don’t feel under pressure to respond if you are in doubt. Be willing to say “I don’t know” instead of guessing.
Actions You Should Take To Avoid A Real Estate Lawsuit
While conducting transactions, make sure you document everything in writing. Ask the seller for full disclosures, or discuss any problems. Keep records of all communications, especially regarding what the seller disclosed to you. Keep copies of the relevant permit history or inspection reports.
Make sure you recommend that the buyer orders a full home inspection. If they decline, then make sure you get it in writing that you recommended it, but they chose not to go ahead.
Good written communication and documentation is vital during each transaction. Save all email and physical communication in an organized fashion for easy retrieval in the future. (This is why it’s best to communicate with clients by email, rather than text, so you’ll have an easily retrievable record should you need it.)
Before a lawyer becomes involved, you may get letters or calls from the clients about challenges. In this case, again, act professionally, and GATHER INFORMATION FIRST before responding. Review your documentation, respond by email, and stick to the facts. If they threaten legal action, then get your lawyer’s advice on how you should handle the next step.
At CRES, we believe in heading off problems before they become E&O claims whenever possible. The moment you think there may be an issue or possibility of a claim situation, contact CRES for advice, and our team will advise l you on the best action to take.
What’s one tip you have for fellow agents when facing questions from a real estate attorney? Share in the comments below.