How to Avoid Getting Sued as a Real Estate Agent

Gavel for judge, law and order

Lawsuits are a constant professional hazard for many real estate agents. These lawsuits are often instituted by buyers who find defects or other issues in the property they have purchased. However, defects are not the only reason buyers decide to sue. There are many other reasons. They can, for instance, sue you alongside the seller for ‘failing to disclose important information’ related to their property transaction.

Five of the most common ones are:

  • Failing to disclose property defects
  • Breach of duty
  • Giving professional advice for which you have no license
  • Data breaches
  • Bodily injury

A lawsuit creates monetary risks because if you lose, you might be required to make monetary compensation to the plaintiff. This is besides the legal fees you will have to pay your lawyer and other related legal costs. Sometimes, you might even be required to offset the other party’s legal fees. Also, a plaintiff may choose to make a formal complaint against you with your professional real estate association, which might trigger a disciplinary hearing or procedure against you. This can obviously put your professional license at risk.

In the event that you do not lose, a lawsuit can cost your business in other ways. It can for, instance, cost your business its reputation, which is a very valuable commodity. A bad reputation can mean that people will be wary of dealing with you and in this age of social media and publicly viewable company reviews, it won’t be too difficult for potential clients to get to know about the lawsuit against you or other people’s opinions about it.

The absolute best thing you can do is to do everything in your power to prevent getting sued in the first place. To this end, we have put together a few tips to help you reduce your risk of getting sued as a real estate agent.

Tips to reduce your chance of getting sued

#1: Carefully choose your clients

The very first and best thing you can do in this regard revolves around the kind of clients you choose to work with. While it can be difficult to turn away a potential client and paycheck, sometimes it just might be in your best interest to do so. And sometimes, you might see some of the warning signs early on in your interactions with this person. You know, that client that quickly gets irritated, or never seems satisfied with what you tell them, or perhaps who outrightly keeps questioning your professional advice and competence.

Then there are those with clear anger management issues or even worse, those that are clearly, or perhaps not so clearly fraudulent.

It is in your best interest to properly research any new clients before taking them on. And if they possess any of the above traits, you might want to consider politely declining to go further.

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#2: Harmonize communications

You should ensure that you have a Standard Operating Procedure that mandates that your clients are kept informed of any and all new developments as soon as possible, regarding their transaction. In doing this, it is important to maintain well-defined and open lines of communication with your clients and all other parties to a transaction. On occasions when you have to discuss with them over the phone, make sure to send an email detailing the main points of the phone discussion. This is to ensure that all your communications are recorded in writing. You should also keep organized records of every decision-making process, showing that all your professional inputs were ethical and above board.

It is also important that you do not mislead your client with false or unrealistic expectations. While it may seem a good idea to keep your client happy by withholding difficult truths, you are duty-bound to inform them about any and everything. After you have conducted a home inspection, for instance, if there are any reasons why the property can or should not be sold at the set price, you should be upfront about it. While it may make them unhappy for a while, it will eventually help them to reach more realistic decisions while preserving your reputation and integrity.

Lastly, you should try as much as possible to make sure that any advice you give falls within the ambit of what your profession allows. Of particular importance is the fact that you should be sure to never give anything that can be construed as being legal advice. This is something that should always be left to those who are trained and licensed to do so, like qualified real estate lawyers.

#3: Always act in your client’s best interest

It is imperative that you always place your client’s best interest above all else. While this should go without saying, the reality of the fact is that things don’t always happen this way. Greed and external influences are sometimes factors that come into play to ‘push’ you into taking a decision that is not in your client’s interest. As a licensed real estate agent, you are bound by the applicable local laws and your professional code of ethics to show fidelity and loyalty to your client at all times. This is to protect you from things like lawsuits, damage to your reputation, disciplinary hearings or a loss of a license to practice.

#4: Don’t initiate proceedings

While it is possible that disagreements may arise between you and your client, you should try as much as is humanly possible to seek a resolution without resorting to filing a lawsuit against them. As a real estate agent, masterful time allocation is essential for success and one thing that a lawsuit will do to your business is to disrupt your schedule and cause you to lose a lot of time in preparing your case and attending court sessions. Aside from the valuable time you will lose by pursuing civil proceedings, there is also the risk of the client filing countersuits and ethical grievances against you, putting your license and reputation at risk.

#5: Liability insurance

Taking up liability insurance is mandatory in some industries or professions and optional in others. Having said that, it is in your best interest to purchase a policy as a real estate agent. Liability insurance will protect your business financially in most cases where a lawsuit has been filed against you. It will usually cover any or some of the payouts you may be required to make to the plaintiff, should you lose the case.

In conclusion, while it is impossible to completely eliminate the possibility of being sued, doing the above-mentioned things just might reduce the chances of it happening. But where that fails, your next best line of defense is having a good and experienced attorney real estate attorney on your side who is also a good litigator.

Author Bio: Kanayo Okwuraiwe is a startup founder and a digital marketing professional. He is the founder of Telligent Marketing LLC, a digital marketing agency that provides law firm SEO services to help lawyers grow their law practices. Connect with him on Linkedln.

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