Buying a home is often the single biggest purchase a person makes in their lifetime. With so much money at stake, a buyer or seller’s emotions may run hot if something goes wrong during a deal or they feel that you’re not working in their best interest. This is one reason why real estate agents are especially vulnerable to professional liability lawsuits.
A real estate lawsuit can be financially crippling for a real estate agent. That’s why many people working in the field take steps to help minimize their risks and buy real estate Errors and Omissions (a.k.a. Professional Liability) insurance to protect their business accounts.
Why would a Real Estate Agent be sued?
Real estate is a complex business. As an agent, you must stay on top of current market trends as well as the laws around buying, selling, and renting properties in your area. Your clients rely on your expertise and advice, and they put a large amount of trust in you to get them the best deal possible.
These responsibilities and others expose real estate agents to professional liability risks that can result in lawsuits. Errors and Omissions (E&O) lawsuits can be triggered by events such as:
- Mistakes or errors in your work
- Misrepresentation of a property or other information
- Nondisclosure or omissions
- Real estate malpractice or negligence
- Misinterpretation of advice provided to a client
- Breach of confidentiality
- Missed deadlines
- Violating state or federal real estate regulations
Professional liability lawsuits can also happen even if you haven’t made a mistake. If a client believes you have acted negligently or that your services caused them a financial loss, they could sue you.
Ways to manage professional liability risks
Business owners in all industries may adopt risk management strategies to minimize the chances of a lawsuit. Real estate agents can do the same. Start by identifying common areas of risk in your industry and potential dangers in how you work. These may include:
- Creating standard business procedures – By treating every client the same, regardless of their budget, you may be able to avoid allegations of negligence or unequal treatment.
- Refreshing your knowledge – The real estate market is constantly changing. Keep on top of pricing and design trends in your area and nationwide to ensure you can provide your clients with accurate information.
- Knowing the law – Violating fair housing legislation can be a severe offence. It’s wise to continually review the laws that regulate buying, selling, and renting real estate to help avoid unnecessary mistakes.
- Documenting your communications – Getting things in writing can help you document client complaints and how you will address them. These records could prove helpful if you are sued in the future. One way to do this is to send clients notes after phone or in-person conversations and ask them to acknowledge what was discussed and sign off on any next steps you have agreed to take on their behalf.
- Working with reputable professionals – Real estate agents often work with other industry professionals, such as building inspectors and contractors. Working with reliable partners could help you avoid claims related to the services that they provide.
- Sticking to your area of knowledge – Clients rely on you to answer their questions and guide them through the buying or selling process. If they ask a question you can’t answer, it’s better to refer them to someone who can rather than potentially provide them with wrong information.
- Accurately representing properties – Misrepresentation in real estate can cause significant problems for your business. Verifying details about each property before listing it is essential, as well as properly disclosing any issues.
- Making your deadlines – Missing a critical deadline could potentially delay or cancel a property’s sale. Submitting paperwork on time can help each transaction go as smoothly as possible.
Every real estate business is different, and yours will likely have its own unique risks. Consider how you work when identifying potential lawsuits and create your own risk management procedures to help address them.
E&O Insurance for Real Estate Agents
Creating and following a risk management plan may not be enough to avoid real estate lawsuits. This is where Errors and Omissions insurance for real estate agents (which we’ll refer to as real estate E&O insurance or realtor insurance) can help.
Real estate E&O insurance is designed to protect your business against professional liability claims that are common in the real estate industry. This includes allegations of negligence, mistakes in your work, breaches of contract, missed deadlines, and other related claims.
Realtor insurance shields your business by covering the cost of a lawsuit, including:
- Hiring an attorney
- Court fees and other miscellaneous legal expenses
- Compensation to the claimant, including settlements and court-ordered judgements
These protections apply for both actual and alleged claims, so you can focus more on your business and less on how to cover the costs of the lawsuit.
Find real estate E&O insurance today
While lawsuits may be common in the real estate industry, risk management strategies can help you prevent unnecessary claims. However, if a client still decides to sue, Real estate Errors and Omissions insurance will protect your small business from professional liability lawsuits.
BizInsure helps real estate agents across the country find, compare, and buy E&O insurance in minutes. Compare quotes now and start protecting your small business.