Errors, Omissions, Insurance
The Real Estate Professional Guide to E&O Coverage

Part 1: How Does Errors and Omissions Insurance Protect Real Estate Professionals from Lawsuits?
Ways to Minimize the Likelihood of Being Sued

No real estate agent can completely eliminate the possibility that they'll be sued. There will always be that client, who feels entitled or wants to blame everything on you. That's just part of the business.

For the rest of the people you'll serve, there are ways to minimize the likelihood that you'll be sued. Let's take a look at risk management tips you can apply to your real estate agency.

5 Ways to Reduce the Chance of a Real Estate Lawsuit

Even the best real estate agents can be sued in an E&O lawsuit. Sometimes the "mistakes" that lead to a client lawsuit aren't really mistakes. They result from miscommunications or client overreactions to a problem with their home purchase or sale. (And while we're on the topic: don't underestimate the potential for "overreactions:" buying a home is a high-stakes game for most people, and emotions can run strong. Emotionally charged situations are the ones most likely to lead to lawsuits.)

What can you do to prevent lawsuits? Here are five strategies to protect your real estate agency:

  1. Communicate. They say real estate is about three things: location, location, location — but really you could say it's all about communication, communication, communication. Given how many lawsuits are about disclosure issues, it's crucial that real estate agents be crystal clear about any problems a property might have.
  2. Document everything. Going hand in hand with communication is documentation. Email makes it easy to document any communications with clients. Send a follow-up to email to clients to confirm things you've agreed to verbally. Take comprehensive notes and retain all papers.
  3. Know your state laws / codes of ethics. It goes without saying that violating your state laws could lead to legal trouble. But knowing your codes of ethics is also important. If you're sued, the plaintiff's lawyers will look for evidence that you failed to fulfill your professional duties. One clear-cut way they can prove this is by showing you didn't follow the professional guidelines established in a real estate agent's code of ethics.
  4. Build relationships. It's a good business practice to build a solid relationship with your clients, but it can also prevent a lawsuit. Clients may be less likely to sue you if they feel they can talk to you about an issue they have with a property.
  5. Avoid going "above and beyond." Real estate agents can get in trouble if they offer advice they're not qualified to give. Be careful about making recommendations to buyers and sellers or referring contractors. Stick to the services you are specifically contracted to do.

While you can't prevent every lawsuit, these five strategies can help you minimize problems or avoid disputes altogether.

Next: How E&O Insurance Reduces the Cost of Lawsuits

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