Because buying or selling a house is one of the largest financial transactions most people will ever make, there is a larger potential for legal action if things go sideways. A lot of times, the real estate agent will bear the brunt of the blame and may find him or herself defending a lawsuit.
Here are some tips on how real estate agents can avoid getting sued:
Consider incorporating. Although incorporating your real estate business will not in and of itself help you avoid litigation, it can protect your personal assets from any judgments stemming from your business. There may also be tax benefits for setting up your real estate business as a limited liability company (LLC) or corporation.
Insist on full disclosure. Most litigation involving real estate agents involves disclosure issues. Real estate agents are required to disclose certain negative information about a property if they are aware of it, so be sure you always follow disclosure rules (whether you are assisting buyers or sellers).
Avoid dual agency. Although you can protect yourself with waivers, representing both a buyer and a seller in one transaction is risky since you have duties to both parties, and those duties can sometimes conflict.
Address complaints quickly. Many lawsuits can be avoided if complaints are addressed quickly. Sometimes a buyer or seller just wants a sympathetic ear. Work with your clients to find solutions to their problems.
Document everything. Keep meticulous records, including emails and notes about conversations you have had in person or by phone. This is especially important if the deal is complicated.
Don’t assume expertise you do not have. While you may be tempted to advise clients on a legal or financial issue based on your experience, remember that unless you are also a lawyer or a CPA, you should limit your advice to the real estate arena.
Buy insurance. Be sure you have sufficient liability insurance, both for personal injury if you routinely drive clients around, as well as professional liability insurance, also known as errors and omissions (E&O) insurance.
Our real estate attorneys represent parties on either side of real estate and financing transactions, including buyers, sellers, landlords, tenants, lenders, borrowers, trustees, guarantors, shareholders, partners, and others. We advise, structure, negotiate, and document a variety of real estate and financing transactions, including leases, purchase and sale agreements, financing agreements, and development agreements for a variety of commercial and residential projects. Contact us today and learn how we can help.