As a real estate agent, you might be vulnerable to a few common lawsuits. One of the best ways to avoid getting sued is to understand the lawsuits that could be brought against you and how to avoid them.
You might not have meant to do anything wrong, but even the smallest mistake could open you up to a lawsuit. Let’s look at some of the most common real estate lawsuits you could face and how to avoid them.
7 Common Lawsuits Real Estate Agents Might Face
1. Property Defect Lawsuit
One of the most common types of lawsuits you might face as a real estate agent is a property defect lawsuit. While you’re certainly not liable for all property defects, if you fail to disclose a property defect, you could open yourself up to a lawsuit.
After a buyer signs the papers for a new home, if they discover a defect or damage, they might blame the real estate agent along with the seller. While they can blame you as much as they want, it doesn’t mean you’re liable or they have a case.
For a property defect lawsuit to become a big deal, the client has to prove you knew about the defect and you purposely withheld the information. You can avoid this type of lawsuit by having properties inspected before listing them and making all buyers aware of any issues. If you represent buyers that do not want to have a property inspection, have them sign a form stating they were advised to have an inspection performed but declined.
Bodily Injury Lawsuit
While it’s less common than a property defect lawsuit, you could end up in court due to an injury suffered during a showing. If you’re found liable, you will have to pay for the costs related to the injury.
The most common reason someone might become injured during a showing is debris on the ground or something else impacting a walkway. Before showing any property, take the time to walk it yourself and evaluate the property for any physical risks.
You should also have liability insurance to protect you if an accident does happen.
3. Data Breach Lawsuit
In today’s world of technology, you’re responsible for any data you gather from your clients. If a hacker were to get into your servers and steal information, you could be held liable.
Before you start collecting client data, make sure you have good security software in place. You want to keep all paperwork and electronic records in a secure place and change your passwords often. Also, make sure to encrypt all data for even more security.
4. Breach of Duty Lawsuit
Another common lawsuit a real estate agent might face is a breach of duty lawsuit. As a real estate agent, you have to act in the best interest of your client. If a client believes you haven’t done this, you could be in breach of duty.
This could be due to negligence or something you intentionally did that doesn’t serve your client properly. Your clients put a special type of trust in you because of your expertise. Make sure you don’t breach that trust as you work to help them find the right home or sell their current home.
Documenting everything goes a long way to help protect you. You should also always use the policy of honest; after all, it’s the best policy.
5. Providing Legal Advice Lawsuit
Yes, you can be sued for providing legal advice to clients. You are not an attorney, so you shouldn’t be providing any legal advice to clients. This includes tax advice.
While taxes and legalities are a part of any real estate transaction, it’s not your job to provide advice on these subjects. If you give the wrong advice, your client could blame you and file a lawsuit. It’s better to refer your clients to an attorney or a tax expert.
6. Lawsuit for Breach of Contract
Whether you’re helping a buyer or a seller, if you have a contract with them, you could end up sued for breach of contract. This means your client doesn’t believe you performed the duties spelled out within the terms of the contract.
Most breach of contract lawsuits will have to do with the time frame of the construct. This can also be the type of lawsuit you face if your client believes you did something fraudulent or with claims of negligence.
Make sure you go over your contracts with an attorney before you start signing clients. You should understand what the contract spells out and what you need to do to hold up your end. An attorney can also help to ensure any unclear terms or clauses are spelled out better to reduce the chance of a future lawsuit.
7. Misleading Your Clients Lawsuit
While your job as a real estate agent is to make a property stand out above the rest, you cannot mislead people. You might decide you want to exaggerate the features or the condition of a home. This could open you up to a lawsuit for misleading clients.
When a buyer feels like you misled them, it might lead to a lawsuit. Make sure you’re truthful about any claims you make about the home. Don’t let anything be left to interpretation.
While you might be able to get the property sold if you use a misleading statement, it could lead to something far worse. You might gain a commission today, but you could suffer a larger financial loss from a lawsuit. Don’t take this chance.
These seven real estate lawsuits can happen to anybody. However, there are ways to reduce your risk of ending up in court.
5 Tips for Avoiding Real Estate Lawsuits as a Agent
1. Choose Your Client Carefully
Before you do anything else, you should have a good vetting process for clients. While you’ll be taking on new clients regularly, you want to make sure you take on good clients.
It’s a good idea to do a little research when vetting clients. With home buyers, a pre-approval letter is a good start to ensuring they are serious about buying a home. With sellers, you want to make sure to look for warning signs, such as quick irritation, someone who’s never satisfied, or someone who questions your competence at every turn.
When you choose good clients, you’ll be less likely to deal with lawsuits in the future.
2. Work in Your Client’s Best Interest
Your client’s interests have to come first when you work for them. Always work for your client, not your commission. Sure, you want to make money as a real estate agent, but when you have your client’s best interest in mind, you’ll cash plenty of commission checks.
The biggest reason real estate agents face lawsuits is greed. Sometimes, outside influences can factor in the way you might push a client in one direction or another.
The best real estate agents always put their client’s interests first. Not only will this protect you from lawsuits, which can hurt your reputation or cost you your license, but it will also lead to more money in your pocket.
3. Have Liability Insurance
While it won’t keep you from being sued, liability insurance will protect you if you’re sued. A good insurance policy will protect you financially if you are sued, especially in the event of someone getting injured during a showing.
4. Communicate Well
Communications is a huge part of a real estate agent’s job. You should be as clear as possible with your clients and make sure they understand what you are trying to tell them.
Don’t mislead your clients or tell them anything that isn’t true. Even giving them unrealistic expectations isn’t a good idea. Let your clients come to their own conclusions after giving them the information you have about a property.
5. Document Everything
Lawsuits fall apart all the time when documents come out showing the claim isn’t true. If you document everything, you’ll have proof you can use, if you are sued.
Even if you communicate with a client over the phone, make sure to send a follow-up email detailing what you discussed. The more documentation you have, the better protected you will be if you end up in court.
Real estate agents can avoid lawsuits with a policy of honesty. Even if you know your client doesn’t want to hear what you have to say, honesty will go a long way. Use these five tips to avoid real estate lawsuits and keep yourself protected, but above all else, be honest.