Professional Liability for Residential Real Estate Agents Part I
In today’s litigious society, there are many ways for residential real estate agents to get sued. Professional liability insurance provides a legal defense and payment for damages on behalf of your real estate clients. However, knowing what type of claims can occur may help them be prepared and possibly reduce the chance of facing these issues. Here are some common legal problems that your clients might deal with.
Misrepresentations: These come in three types; innocent, negligent, and fraudulent. Negligent misrepresentations include failure to disclose significant property flaws out of ignorance while fraudulent misrepresentation is purposefully hiding a property flaw or feature to make the sale. Agents should use seller disclosure forms and document all sources of information from their sellers.
Breach of fiduciary duty: Unfortunately, common law duties are not always clearly defined state-by-state, meaning that agents and brokers aren’t always aware of exactly what duties they own. Your clients should be encouraged to take continuing education on their state’s current laws on agency disclosure.
Fair Housing: These violations don’t account for a large percent of litigation; however they can result in costly judgments. It’s imperative for your clients to know what the fair housing laws are, and inform their sellers as well. It’s advised that real estate agents not take on sellers who refuse to sell to someone of a certain ethnic background or race.
False or misleading advertising: It’s important that your clients’ advertising always complies with state licensing laws or regulations, as well as the REALTOR Code of Ethics. Real estate advertisements should be truthful and not misleading. Agents need to comply with any special rules adopted in their state that governs the advertising of property and the promotion of real estate services on the Internet.
These are just a few of the potential legal issues that residential real estate agents may face. The best way for your clients to protect themselves from claims is by investing in professional liability insurance. However, by making sure that your clients familiarize themselves with these problems, you could be helping them limit their risk exposure.
PLRisk Advisors is a leading wholesale insurance brokerage covering the professional liability market. Our team of seasoned professionals has the depth of knowledge to help our agency partners secure the best quality of coverage for their clients. We provide Professional Liability, or Errors & Omissions, insurance products for a number of professionals, including both commercial real estate agents and residential real estate agents. Please contact us today for more information at (855) 403-5982.