You could be sued if:

• A disgruntled buyer gets buyer’s remorse and claims you didn’t act in their best interest.
• Your advice does not meet client expectations.
• You fail to document decisions or actions.
• A client claims you didn’t tell them about water damage in the house and is trying to recover the cost of mold remediation from you.

You don’t have to actually make a mistake to be sued for professional liability, either. As long as the client sees that your services have resulted in financial losses, they could bring legal proceedings against you.

Read on for tips on how to recognize the events that can lead to E&O lawsuits and how you can manage your professional liability risks.

Reasons why real estate and title brokers are sued

What can put your real estate or title brokerage business in the middle of a million dollar lawsuit? Here are some common triggers for E&O claims:

• Misrepresent the condition, boundaries or size of the property
• Non-disclosure
• Failure to verify information provided by the seller to the buyer
• Undisclosed or undetected water damage, pest, or sewage or septic problem
• Errors in the home inspection (the inspector failed to identify cracks in the foundation, a leaking roof, etc.)
• Violating your state’s real estate regulations (such as fair housing rules)
• Error interpreting domains
• Error in comparative market research report
• Incorrect appraisal
• Unintentionally offering bad or incorrect advice
• Bank mortgage error
• Breach of confidentiality

So say, for example, a home buyer claims that your MLS listing has embellished the property’s features. Since it is your responsibility when showing a house to explain the features of the property, the buyer sues your real estate business, claiming that you have misrepresented the house.

How to manage real estate professional liability risks

Keep those common error triggers and omissions at bay with a thorough risk management plan. This could include:

Create universal standard procedures

Be sure to treat all clients equally, regardless of their spending abilities. You should always stay up to date on fair housing laws so you don’t accidentally make a mistake when helping someone buy or sell a home.

Document client communications

When you are sued for professional liability, you will need records to prove that your business is not liable for negligence or other wrongdoing. Make sure you properly document and store all communications with clients, but especially any challenges that arose during the process.

Be careful when choosing inspectors on behalf of your clients

Let’s say you are facilitating the sale of a newly built home. After closing, the buyer discovered water intrusion defects on the property. However, the inspector you employed did not identify any of these alleged defects. That’s why the buyer decides to sue you: because it was your responsibility to choose an inspector who specializes in roofing and foundations. To avoid this situation, make sure you vet your experts based on their reputation, expertise and credentials.

Not offering advice outside your area of ​​expertise

Buyers rely on your expertise to guide their purchasing decisions. So if you come across a situation where you’re not sure what the right answer is, try to avoid offering an opinion. Instead, refer your client to someone who can offer the advice they are looking for.

Not to misrepresent or exaggerate property characteristics

Always check the information you get from a seller before you notify the buyer. If you accidentally repeat a seller’s exaggerated claims about the property, you could be sued for negligence (or outright fraud). Say, for example, a seller claims the property is 1,582 square feet, and you list the property as such. If the property is only 1,282 square feet, the buyer could sue for diminished value of the property based on the square footage discrepancy.

Revealing defects in the property

To avoid being sued for negligence and breach of fiduciary duty, be sure to disclose property defects before ever selling. Say you are a real estate agent who represents sellers in the sale of their residential property. If undisclosed defects are found after closing, the buyer could seek to recover current and future repair costs from your small business.

Keep your promises

Never make a promise you can’t keep, lest you risk a lawsuit. This means never promising that a property could be bought or sold at a certain price or preemptively saying that a seller will pay for closing costs when you’re still waiting for confirmation.

Make your deadlines

A real estate transaction is punctuated with deadlines to ensure a smooth sale. To ensure that you are not the reason for any delays, please ensure that you submit paperwork by the stated due date to avoid unexpected canceled contracts.