When you’re running your own real estate business, you provide great customer service as part of your business-building strategy. But doing so makes it easy for “scope creep” to occur. Naturally, when clients ask for advice, you’ll want to give them all the help they need and more. However, it’s crucial to keep any advice and information you give well within the scope of your expertise. Otherwise, you could find yourself facing a lawsuit and liabilities which could affect your real estate business in the future.
What Exceeding Your Scope of Work Can Look Like
There are many ways real estate professionals can inadvertently find themselves exceeding the scope of their responsibilities as an agent:
Providing Recommendations about Trades or Services
One of the common pitfalls is when agents provide recommendations to clients about other trades or services. Your client may need a contractor, handyman, carpet cleaner, attorney, cleaner or even an insurance provider or an accountant. You deal with these people every day, so what’s the harm in suggesting someone you know? Well, unfortunately, there’s potential for this to go wrong very rapidly.
What happens if the carpet cleaner you recommended accidentally ruins the client’s premium carpets? What do you think will happen to your reputation and business if an attorney you recommended defrauds the client?
Your expertise is in real estate, so ensure any advice or information that you provide to the client pertains to just that. Staying within your scope of work can help you reduce your risks and liabilities. And it greatly reduces the chance of you facing your client in court about a recommendation which has gone terribly wrong.
If you find yourself in a situation where your client asks you for a recommendation for another service provider, the best idea is to just not do it. However, if you must, ensure you provide multiple options. Make it very clear in writing that it’s the responsibility of the client to select the option which best suits their individual circumstances.
Providing Commentary on the Neighborhood
Another way in which real estate professionals can exceed their scope of work is through providing seemingly innocent commentary about the neighborhood. Comments might include things like:
“There’s a low crime rate here, you’ll be very safe.”
“There are no major developments planned for this neighborhood, so it will be very quiet”
“I recommend xyz school down the street”
No doubt the buyer will have questions about the neighborhood — the services available, shopping centers, parks, schools, maybe even crime rates, proximity to industrial areas and/or the impact of busy, main roads nearby.
When responding to your client’s questions, ensure you stick to the facts. It’s fine to say there’s a park close by, or a main road a mile away. Ensure your comments are factual, not opinion-based, so your client can’t in any way interpret your response to be a recommendation or instruction to do something.
In the case of questions around crime rates and developments, provide your client with links to primary sources of information. For example, crime rate statistics will likely be available from the police. Information about major developments will be available at the local county office or council. Don’t summarize the information yourself verbally or in your marketing information. Simply send your clients to the source to obtain the information themselves, so they can make an informed and independent decision.
Taking On Responsibilities That Are Outside Your Expertise
A time-poor seller may ask you to arrange for property repairs, cleaning of the home, or even to maintain the garden. These duties are outside of your area of expertise and responsibilities as their real estate agent.
What would happen if the builder you engaged to do work at the home accidentally damaged the property? Or what if the cleaner ends up stealing the client’s valuables during a clean? What if the gardener didn’t show up, causing the established garden to wither and die due to lack of watering.
Potential risks and liabilities need to be considered in every action you undertake in your real estate role. If you do decide to assist your client with something outside the scope of your real estate responsibilities, speak to your attorney and your insurance provider first. They may recommend you obtain a waiver, or establish a formal contract or agreement which provides you with indemnity should something go wrong.
How to Protect Yourself and Your Business
The best protective measure for your business is to not step outside the scope of your expertise. However, the nature of the real estate industry means you could get involved in scope creep inadvertently. This is where insurance can protect you — for those unplanned situations you cannot foresee. Check your current insurance policy to see what’s covered if an incident around scope of work occurs. CRES Real Estate E&O + ClaimPrevent®, is fully customizable, so you can ensure you’re covered for all relevant risks relating to your real estate business. It also comes with free access to Legal Services 7 days a week, so you can prevent claims before they become major issues. To find out more about CRES Real Estate Insurance options, contact us at 800.880.2747.
This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.