Errors, Omissions, and Real Estate Liability Insurance

Real estate agency owners are due to the nature of the business especially susceptible to professional liability lawsuits simply because they handle a lot of expensive property transactions. This is primarily due to the fact there are so many ways that a real estate transaction can go unsatisfactorily, which only heightens the likelihood of a disgruntled client bringing a lawsuit against the agent.

That’s why it’s so important to always carry sufficient real estate liability insurance. One expensive court settlement could ruin a small business entity.

Following are a few reasons why lawsuits occur in the real estate industry:

  • The buyer gets cold feet and alleges that the agent didn’t act in their best interests
  • The advice given fails to meet a client’s expectations
  • The agent fails to properly document decisions or actions, or
  • A client alleges the agent failed to disclose information about water damage or structural damage they had knowledge of
  • Misrepresentation of the property condition, boundaries, or size
  • Failure to verify information given by the seller to the buyer
  • Undisclosed or undetected water damage, infestation, or sewage or septic problem
  • Errors in the home inspection
  • Violations of your state’s fair housing rules
  • Inaccurate appraisal
  • Inadvertently offering bad or inaccurate advice, and
  • Breach of confidentiality

The fact is that the agent doesn’t have to actually make a mistake to be sued under a professional liability claim. As long as the client perceives that the services provided lead to a financial loss they could decide to file a lawsuit.

How to manage real estate professional liability risks

Managing real estate professional liability risks can be helped greatly by creating a universal standard of procedures. Make sure your agency treats all clients equally, regardless of their net worth. You should always keep up to date on fair housing laws so you don’t accidentally make a mistake when helping someone in the market to buy or sell a home.

Documenting client communications goes a long way in preventing errors from occurring. Your records will likely be the only proof that your business isn’t liable for negligence or other wrongdoing. Be sure to document and properly store all client communications, but especially any challenges that arose during the process.

Proper risk management planning can help avoid devastating challenges, and real estate liability insurance is the cornerstone of any risk management strategy.

 

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