As a real estate professional, you want to do everything you can to minimize your risk and protect yourself from potential lawsuits.
Here are the Top 10 mistakes real estate agents make that leave them vulnerable to a lawsuit. Check out our tips to avoid them.
- Failure to get everything in writing
It’s essential to get all important information in writing. Otherwise, you could find yourself in a “he said”, “she said” situation in a court of law trying to argue that you acted appropriately. All offers and acceptances, directions from your clients and other information, need to be in writing. If you happen to discuss something important with your client over the phone or via video chat, follow up shortly after with a recap of the conversation to ensure there’s a written record.
- Providing a list of preferred providers to buyers and sellers
While it might seem useful to provide a list of “preferred providers” to buyers and sellers when they ask for recommendations, consider the consequences of a bad customer experience. What if one of those mortgage brokers you recommend provides terrible service and the client ends up with additional out-of-pocket expenses? What if that building inspector you suggest misses something crucial, and the buyer launches a lawsuit when they find out something is seriously wrong? Avoid providing lists of preferred providers to clients. Instead, encourage your clients to do their own due diligence and independent research.
- Failure to disclose
Most real estate lawsuits arise because of a failure to disclose. As a real estate professional, you must disclose anything about a property that could affect its value and desirability. Honesty is truly the best policy in this case — even if the disclosure may affect the sale price and your commission. If you know about it, you must disclose it.
- Making suggestions beyond your expertise
Don’t ever make suggestions or recommendations to your clients which extends beyond the scope of your expertise. Only provide advice in the context of your role as a real estate professional. For all other unrelated inquiries (legal issues, tax issues, etc.), encourage your clients to undertake independent research and contact other sources for information.
- Failure to do title checks first
Real estate professionals should do title checks first to ensure they’re aware of the ownership of the property and who has the rights to list it for sale. A title check will also identify any encumbrances on the property. Failure to do title checks first could result in an invalid listing, an unlawful property deal ,and/or a lawsuit situation when the real owner of the property finds out it’s for sale!
- Not communicating with clients as often as they’d like
As a busy real estate professional, you may be juggling multiple clients and several properties at once, while also trying to run a thriving business during a pandemic. Because of these competing priorities, sometimes communication with clients can go by the wayside. Remember that strong relationships are essential in real estate. And, unless you want to have disgruntled clients who may be inclined to sue you in the future, keeping up communication is an essential part of running a successful real estate business.
- Agreeing to list a property above the market price
Agreeing to list a property above the market price will never end well. Your client will be disappointed when there are no offers coming in. Buyers will be disappointed because the property is overpriced and will simply look elsewhere. And, you, as the agent, will be putting effort and resources into a property that’s not likely to sell within the current market. Properties sitting stagnant on the market are not good for your reputation as a real estate professional either, so consider this when you advise sellers about pricing.
- Not educating clients on potential wire fraud situations
Scammers and fraudsters are using clever techniques to trick unsuspecting victims into transferring money to them. There have been several cases where clients have been tricked via very convincing emails to pay large sum deposits for properties, only to discover that the money has gone to a scammer instead.
To avoid this type of situation, be clear with your clients about the transaction process and ensure they’re aware of potential phishing and wire fraud scams. Be sure to follow up emails regarding wire transfers with a telephone call instructing the recipient to not change instructions without an email and verification by a telephone call.
- Failure to renew your E&O policy on time
Don’t get caught without protection for your business and your livelihood. Forgetting to renew insurance is a common issue, and the consequences can be dire. To maintain coverage for prior transactions, your real estate E&O insurance has to have been continuous with no gaps.
Ensure you know when your E&O insurance is due to expire and be sure you renew your coverage promptly,
- Not having an E&O policy to protect your interests
Real estate professionals should have an E&O policy to protect your business in case something goes awry. Even when you’ve done nothing wrong, you may still have to defend yourself against a disgruntled client.
Call on the experts at CRES to help you find the right coverage for your business. We’re specialists in real estate E&O, and can help you choose the right coverage for your business. With CRES E&O + ClaimPrevent®, you’ll even get access to qualified attorneys to answer your legal questions 7 days a week.
We’re part of one of the largest insurance brokers in the world, so we have access to more E&O options than just about anyone. If our preferred options aren’t the best choices for you, we’ll shop to find you the right policy. From real estate E&O to Business Owner’s Policies and more, we’ve been helping to protect real estate pros for more than 20 years.
Contact CRES at 800-880-2747 for a confidential discussion today.