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When Friendly Competition in Real Estate Can Lead to a Lawsuit

Real estate is a competitive industry. A bit of friendly competition is natural, but what if your licensees take it a step too far and won’t cooperate with each other? Brokers can be held responsible for the actions and behavior of their team. This can have significant ramifications for your brokerage, your reputation and finances if you have to defend a lawsuit. 

Here’s what can go wrong and how you, as the broker, can avoid this scenario by minimizing the risk and creating a high functioning team. 

What Can Go Wrong?

As a broker, you may have multiple licensees working for you. In most cases, these licensees are independent contractors and not employees, which means they’re running their own businesses and competing against their colleagues for commissions. Add to that performance bonuses and incentives that brokers sometimes offer, and a brokerage becomes a highly competitive environment. This can create challenges such as:

Unethical Tactics 

A competitive climate might result in licensees using unethical tactics to get ahead. This can include poaching listings from their colleagues. This can take many forms, including obtaining another licensee’s client contact information, soliciting their clients and offering sneaky incentives. 

Illegal Conduct

There are risks in a competitive environment that rogue licensees could pursue illegal maneuvers to get the edge on the competition. They may make false statements or exaggerations about a property. Or, they might make disparaging remarks to defame another licensee to deter a client from choosing their ‘competitor’. 

Breach of Contract  

Breach of contract is common in these scenarios. But it’s not just about the licensees engaging in this underhanded behavior breaching their contract with you — their actions may result in breaches of contract between your brokerage and your clients or other licensees.

Reputational Damage
In any of these scenarios, you can expect damage to your reputation as a brokerage. Brokers can be held responsible for the actions of their licensees. This may make clients hesitant to work with you and other licensees unlikely to join your team. 


When friendly competition extends into illegal or unethical behavior, lawsuits will follow. Grounds for claims for damages can range from misrepresentation and defamation to failure to disclose or negligence. Lawsuits can be expensive to defend. They can cause a lot of stress for brokers. The legal process can also take its toll on finances if you don’t have adequate insurance to protect yourself and your business. 

How Brokers Can Avoid Competition Getting Out of Hand  

The best thing you can do as a broker is to create a teamwork culture within your brokerage. Encourage collaboration through regular team meetings and opportunities to connect with each other. A team environment can be fostered by encouraging co-listings and a climate where all licensees are motivated to help each other. Establishing team incentives and rewards instead of always focusing on individual achievements can be useful. 

Ensure your onboarding process includes a comprehensive induction about your expectations for licensees, including behavioral and ethical standards. Accountability measures need to be in place so that your licensees keep aligned with these standards. Regular team education about risk management and potential factors leading to a lawsuit is also recommended. Licensees need to be aware of the consequences of their actions on the brokerage, your clients, and on their individual career paths. 

Leading by example is one of the best ways to create a positive workplace culture. If you want your licensees to be transparent, honest, and supportive of others, demonstrate those behaviors at the leadership level. 

A good company culture and a workplace that encourages cooperation and teamwork will not only help you to avoid most of the pitfalls detailed in this blog. It will also bring additional advantages. A happy team is a productive team. Fostering a supportive team environment in your workplace can positively impact productivity within your brokerage. It can enable you to provide a higher level of service to your valued clients and boost your business and bottom-line profits.

Protect Your Brokerage With CRES Insurance

As a broker, real estate E&O Insurance and a Business Owner’s Policy are essential to protect your business. CRES can customize an insurance policy to suit your business needs. Contact the friendly team at CRES at 800-880-2747 for a confidential discussion today.

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