9 Situations That Can Get You Sued in Real Estate
Litigation is an essential part of American society. Practically no industry is safe from this, including real estate. Although someone can prosecute at any time and in practice for any reason, specific circumstances and techniques can make you more liable for litigation.
In the present era, Real estate agents are particularly vulnerable to litigation. The slightest mistake can open the door to a costly lawsuit that can ruin someone’s finances and ruin a good reputation. When dealing with so many details, it’s easy for something to slip through the cracks. Here are nine everyday situations where you are more likely to be prosecuted:
Breach of Duty
The most common case brought against real estate agents is breach of duty. Real estate agents know that they should always work in the client’s best interests, as clients rely on real estate agents for their expertise.
Real estate agents are held to the highest standards of honesty and disclosure. Any breach of this duty, whether negligent or intentional, is subject to the risk of prosecution.
Always document everything, and practice honesty at all times to avoid this common mishap.
Failing To Disclose a Property Defect
After signing the documents, buyers who detect defects will immediately blame the real estate agent. Every damage and every defect found on the property should be well documented.
Defects can include construction problems, repairs without a permit, leaks, noise, or disturbance.
When a buyer sues a real estate agent for failing to disclose a property defect, he must prove that the agent knew or should have known about the defect and did not disclose it.
Inspect the property thoroughly, and ask your clients to sign a statement documenting their awareness of any issues.
Giving Legal Advice
Clients want their real estate agent to have an answer to their every question. Similarly, real estate agents want to help their clients.
Remember that most states consider it illegal to provide tax or legal advice to a real estate client. This mistake is complicated to avoid because taxes and legal status are integral to real estate.
If you give the wrong advice, your client can hold you responsible for any consequences. Instead, politely ask your clients to send such questions to a reputable local lawyer or tax professional.
Representing Clients in Unfamiliar Territory
If you are showing and selling properties in an unfamiliar area, be extra careful and do your research first.
Sometimes there are needs or other situations that you are not aware of. If a problem arises due to geographical location, some clients may blame you for failing to alert them to such concerns.
Every real estate agent tries to separate their property from the mob. There may even be a temptation to exaggerate here and there about the features or condition of the house. However, this type of fraud can harm you as a real estate agent.
If a buyer feels misled about something, a lawsuit could be filed shortly afterward or they will not use your services again or give you a good referral. Always be truthful about the property you represent, with no room for misinterpretation.
A misleading statement might lead to legal action and financial loss, endangering your pockets and your reputation.
Breach of Contract
When a client claims that a real estate agent did not comply with the terms of the agreement, they may seek legal action.
One of the most common reasons for the breach of contract is failure to comply with the time frames outlined in the agreement. Violations of contract claims are often combined with claims of negligence, fraud or breach of duty.
Reviewing every aspect of your contract with a lawyer is essential to ensure that all relevant information is accurate and that most states have specific legal contracts to be used for transactions. If this is the case in your state, stick with those contracts and not use something you have made.
In addition, be sure to take the time to consult with each client on the terms of the agreement. Identify any obscure clauses, conditions or issues to reduce the chances of legal action later.
Failing To Keep Your Clients’ Data Safe
Online thieves are everywhere, and they want your customers’ information. Plus, if they manage to get it, you’ll be the ones paying.
Protect your clients’ information from criminals by installing security software and keeping your paperwork safe. Do not transmit sensitive information via email or text; document all your communications in encrypted formats. Once you have a secure system, change your password regularly and check that your data is encrypted.
Failing To Recommend Inspections
Real estate agents often fail to recommend a property inspection to potential buyers. Your clients rely on you for your expertise and guidance through the real estate process. But some areas require the opinion of a third party.
Inspectors should inspect ponds, chimneys, roofs, septic systems and structural problems, to name a few. At the very least, a general home inspection should be recommended regardless of the cost, and you should document this recommendation.
A client might accuse their Realtor of negligence for failing to take proper care of others, which a reasonable or prudent person would do under the circumstances.
Clients may claim that a real estate agent should have known something but failed to take appropriate action.
Negligence is different from deception because there is no element of intent. Most clients seeking legal action will start by claiming fraud, but if they cannot prove their intent, they will seek compensation for negligence.
It is difficult to stop negligence claims because you do not always know what you should have learned. Get general liability, professional liability and commercial auto insurance coverage for these unfortunate incidents.
Even small mistakes can cost you a lot of money, a whole mess of stress, and, worst of all, can ruin your reputation. Fortunately, you should take proactive steps to protect your real estate career.
While accidents can still happen, learning how to avoid the most common mistakes can significantly reduce the risk of being sued, and you should still be prepared and learn more about these risks.