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Five Risk management steps to avoid issues & potential lawsuits

By
Services for Real Estate Pros Insurance NPN # 13379201

1.      When in doubt, disclose.

If you’re a real estate agent, disclosure should be your mantra. If you know something that is or could be important, you should make sure that your seller discloses that fact. Otherwise you too could be looking at a lawsuit.

2.      Know what hat you’re wearing.

 

Anyone in a client-serving business wants to be helpful to their clients. Unfortunately, however, in today’s litigious society it is not wise to give advice beyond your area of expertise. Real estate professionals aren’t usually trained as lawyers, or engineers or inspectors. So don’t go beyond your expertise to answer someone’s questions. That means you shouldn’t tell your client that he should sign an arbitration clause because it’s "cheaper and quicker" or that you think creaking in the floorboards is probably nothing. Rather, suggest and document that he discuss his concerns with the appropriate specialist.

3.       Recognize your role in the process.

 

While you shouldn’t give advice outside your area of expertise, as a real estate professional you’re often in a better position than your clients to spot red flags. Courts have often held agents to a higher standard than the average person. So while you should not give advice about a problem, it’s very important that you point out potential trouble spots and steer your clients to the right specialist to help them evaluate their options.

4.      Find a translator when necessary.

 

Most cities, and increasing numbers of rural areas, have populations that may or may not yet be proficient in the English language. Perhaps you have a large Vietnamese community where you do business, or are working with an Ethiopian family that’s fluent in Amharic but struggling with English. If your client isn’t proficient in English, then you must locate a family member or friend who can translate for him. Equally important: document the conversation. For example, write down and confirm that the mother who’s buying a property had her daughter explain the terms to her satisfaction, in her native language.

5.      Understand your fiduciary duties.

 

Your fiduciary responsibility is what you, as a real estate agent, owe to your client. It actually includes several duties:

 

The duty to be absolute and undivided in your loyalty

 

—There should be no hint of any conflict of interest. This requires diligence, faithful service, integrity, utmost care, honesty, good faith and full disclosure.

 

The duty to keep client monies in separate accounts

 

—Any dollars that you are holding for one client must be kept separate from other funds. Never commingle monies and always provide an accounting of all funds.

 

The duty to explain and provide counsel

 

—As a real estate agent, it is your obligation to make sure that your client understands his or her obligations under the contract. This means, for example, that a listing agent must explain the nature and scope of disclosure requirements. And a buyer’s agent needs to explain the client’s right to bring in specialists to investigate aspects of the property. At the end of the day, it doesn’t matter whether a buyer opts to get an inspection—just that you informed him of his right to do so and confirmed that he either did investigate or chose not to do so.

 

Posted by

 

Jane & Garry Smith
Coldwell Banker Realty - Portland, ME
ABR, GRI, Realtors - Portland, ME - (207) 253-3195
Thanks, Frank. All important reminders. I especially like #2, Know what hat you're wearing. We hear agents give inspection and legal advice all the time and it's just wrong and can lead to potential problems for them down the road. Great post, thanks!
Jan 17, 2012 12:02 AM
Wayne Zuhl
Remax First Realty II - Cranford, NJ
The Last Name You'll Ever Need in Real Estate

What a great reminder. I'm suggesting and reblogging - thanks for a great post!

Jan 17, 2012 12:03 AM
Lakeridge Land Surveying
Lakeridge Land Surveying - Montverde, FL

All very good points! especially #1 When in doubt, disclose...... thanks for sharing!

Jan 17, 2012 12:12 AM
Insurance Solutions
Insurance Solutions Unlimited, LLC - West Palm Beach, FL
Insurance

Very good information. knowing your role, disclosing and Understand your fiduciary duties are important reminders to all.

 

Jan 17, 2012 12:17 AM
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Eighteen Years Experience in Brevard County

Number two is key. We are not contractors, roofers, lawyers, CPAs...great advice!

Jan 17, 2012 12:19 AM
Fernando Herboso - Associate Broker MD, & VA
Maxus Realty Group of Samson Properties - Clarksburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

Knowing our roles is part of our profession. . .there is risk in everything we touch

Jan 17, 2012 12:24 AM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

My limiting of my legal exposure BEGINS with my agreement with my clients.  While trade organization forms may protect the public/customer, I think that having a good agreement with clients is KEY to removing the temptation for litigation.

Jan 17, 2012 12:32 AM
Frank Laisch
Orlando, FL
"The Insurance Guy"

Jane & Garry Smith- Thanks, # 2 very important

Wayne and Jean Marie Zuhl - thanks for suggesting and re-blogging

Lake-ridge Land Surveying- disclose, disclose,disclose...

NIS- Thanks for your comment

Gary L Waters- I agree,

Fernando- Thanks, knowing our roles and avoiding risk is a good thing

Wallace- excellent point and advice!

Jan 17, 2012 12:42 AM
Edward Gilmartin
CRE - Boston, MA

Always stay away from answering questions regarding tax implications of real estate...laws are always changing..If asked tell them to call their tax accountant.

Jan 17, 2012 01:23 AM
David Cole
David Cole CPA - Orlando, FL
David Cole CPA

I always say let Professionals do their specialty... good information Frank. Thanks for sharing

Jan 17, 2012 07:56 AM
Insurance Solutions Unlimited,LLC
Insurance Solutions Unlimited, LLC - Winter Haven, FL
Insurance Solutions Unlimited,LLC

Great information Frank, knowing responsibilities and Disclosing are so important  

Jan 22, 2012 12:39 AM
Charles Stallions Real Estate Services
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Thanks for the post, we are can be educated on protesting ourselves from the frivilous

Jan 26, 2012 02:18 PM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

Take these additional steps to help you mitigate risk:

 

  • Stay up-to-date on the types of disclosures required by law.
  • Ensure that sellers understand the legal consequences of withholding material information about their property from prospective buyers.  Refer clients to their legal counsel for specific information about matters to disclose or not disclose that you are not sure of.
  • Once you, or another certified professional, has viewed or examined a property, never make statements about the property that you believe to be false.
  • Never express opinions about a property’s future, such as, “I’m sure the value of this home will go through the roof,” or, “You’ll never have zoning difficulties at this location."   Such statements leave you vulnerable to charges of misrepresentation, negligence, or both.
  • Always keep records about the information you provide to clients and others, whether the information was given verbally or in writing.
  • Personally view and inspect the properties you list and inform sellers and potential buyers about any evidence of material facts in a timely manner. You cannot delegate that responsibility to another.
  • Recommend to buyer clients that they should have an expert inspect property conditions and not just accept the seller’s disclosure statement.
  • If you are doubtful of the answer to a client question, research the answer before providing a response. You can also ask the advice of your designated broker.

 

Sep 14, 2015 06:56 PM