6 Most Common Claims For Real Estate E&O Insurance

Real estate agents are vulnerable to getting sued in today’s litigious society in spite of following everything by the book. You don’t want to be one of those unlucky agents to be served papers, but it happens. The slightest mistake could stir up a costly lawsuit that could wipe you out financially and damage your good reputation. That’s why Errors & Omissions Insurance (known as E&O Insurance) is a MUST for real estate agents!  E&O Insurance protects you from lawsuits claiming you made a mistake in your professional services. It also helps cover costly court costs and settlements. Here are some of the most common types of E&O Insurance claims and how to avoid getting yourself into a similar situation:

1) Inaccurate Listing Description

While you want your listing to be as appealing as possible, never exaggerate on the features and conditions of a house. Be precise and truthful in your listing descriptions so that nothing can be misconstrued as fraud. Withholding property defects about a home such as zoning issues, plumbing problems or potential health hazards like mold or asbestos  could lead to trouble. Even a little white lie can blow up into a major lawsuit and it’s just not worth the risk.

2) Breach of Fiduciary Duty 

A client can claim breach of fiduciary duty when a real estate agent fails to act in the best interest of their client. This can include receiving extra commissions or profit not disclosed to the client, misappropriating funds, and breaking a client’s confidence. Holding back information on multiple offers during price negotiations is also a serious breach of fiduciary duty. Honesty, loyalty and transparency are of the utmost importance to your agent/client fiduciary relationship and will always pay off in the end.

3) Buyer’s Remorse

A client could blame you for advising them to offer too much on a home leading to “buyer’s remorse.” While clients want their agents to have the answers to everything, real estate agents can get sued for offering guidance even with the best of intentions. Always keep a written record of advice that you provided to a client pertaining to buying/selling a home. It’s easy to follow up with a quick email confirming advice given and your client’s response. A realtor should never give tax or legal advice.

4) Wrongful Discrimination

Agents can be sued over claims that someone was discriminated against due to race, color, gender, disability, family status, national origin, religion, sexual orientation and sexual identity. Familiarize yourself with the Fair Housing Act law which was created to prevent discriminatory practices in the housing industry. While you may always do your best to treat everyone fairly, unintentionally breaking the law could result in an ugly lawsuit.

5) Wrongful Eviction

Unfortunately, no matter who you rent to, evictions happen and they are rarely amicable. You could be accused of wrongfully evicting a tenant by inadvertently failing to post the legally required notices. Also, removing a tenant from your property requires a legal eviction process. If you don’t follow the process, you could end up in court. Knowing your state’s eviction laws up front can help you avoid going down this road.

6) Undisclosed Structural Flaw

Always be upfront about all structural defects no matter how insignificant they may seem. Windows and doors often show signs of structural damage when they won’t close properly or if there are gaps around the frames. Cracks in walls can also be serious signs of structural damage. Address these problems in advance so your clients don’t discover the problem after they move in and hit you up for compensation.

Protect your real estate business with E&O Insurance designed for real estate professionals. Learn more on: RealShieldInsurance.com