Top Ten Ways For A Real Estate Agent To Avoid Being Sued

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Maintaining appropriate coverage against error or omission by a Real Estate business is critical in today’s world. The fact is, 1 out of every 4 Real Estate professionals will be sued in their career. It is important to remember that even if you are adamant that a lawsuit is groundless, even if you cross all your T’s and dot every single I – you can still be sued for alleged acts, and those legal defense costs are not cheap. In an industry that deals with high valued properties, the costs to defend claims results in significantly higher legal fees due to the greater complexity of high value sales. It is vital that your insurance representative understands your industry and the specific details of your corporation, to properly address the risks of operating as a business with appropriate, comprehensive, insurance and risk management options. At Landy Insurance, we are ready and available to help – but in the meantime, here are some situations to avoid.

  1. FAILING TO DISCLOSE: Many lawsuits arise out of agents knowing a material fact that affects the value or desirability of a property and failing to disclose that fact to the buyer. For example, agents knowing about, but failing to disclose, improvements without permits, constructions defects, roof or water leaks, cracking, noise, or nuisances.
  2. FAILING TO RECOMMEND INSPECTIONS: Buyers’ agents frequently fail to recommend appropriate inspections, such as pool, chimney, general home inspection, roof, septic, structural or soils.
  3. FAILING TO IDENTIFY POTENTIAL ISSUES: Agents occasionally fail to identify red flags, which could indicate more serious issues, such as cracking walls, which may be signs of a structural or drainage defect.
  4. FAILING TO PROPERLY ADVISE ON THE TERMS OF A CONTRACT: When an agent prepares or reviews a contract, the agent does not identify issues, explain the terms, or discuss problematic clauses.
  5. EXAGERRATING FEATURES OF THE PROPERTY: Agents sometimes exaggerate or over-emphasize features of a house with statements that border on untruths. Buyers will move into the house and learn that the house was not what they believed it to be.
  6. FAILING TO EXPLAIN THE SIGNIFICANCE OF A DISCLOSURE ISSUE TO BUYERS: A buyer learns of a defect during the inspection period but fails to understand its significance. They generally blame the agent for not explaining it or recommending further investigation.
  7. MAKING PROMISES YOU CANNOT OR DO NOT KEEP: Agents sometimes promise their clients or another party that they will do something and then fail to do it. Keep your promises, do what you say you are going to do, and then keep the client informed.
  8. FAILING TO EXPLAIN THE SIGNIFICANCE OF A DSCLOSURE ISSUE TO SELLERS:  A seller fails to disclose a material fact and when a claim is made by the buyer, the seller claims that the agents did not properly advise the seller to disclose the issue.
  9. FAILING TO COMPLY WITH THE TIME FRAMES IN THE CONTRACT: Generally, real property purchase agreements contain time frames in which the parties are to perform certain obligations. If the time frames are not followed, a party may cancel or terminate the agreement. If this occurs, the agents may be held liable.
  10. REPRESENTING CLIENTS IN UNFAMILIAR GEOGRAPHICAL AREAS: Agents frequently represent clients in unfamiliar geographical areas. Many times, the area has certain specific characteristics or requirements of which the agent is unaware. When the issue is not identified and the buyer learned of it later, the buyer generally blames the agent.

Joanmarie C. Berry, CLCS LUTCF                                Direct: 781-292-5407

Director of Marketing & Sales                         

The Herbert H. Landy Insurance Agency, Inc. 

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