Top 10 Reasons Real Estate Agents Get Sued
As a real estate agent in California – no matter if the market is high or low – you need to be extra careful when making real estate deals, as buyers can sue for any number of reasons, frivolous or not.
Suing Their Real Estate AgentThey bought the home for $1.2 million at the height of the housing boom, but the housing market crash was soon to follow and many homes in their neighborhood were selling for up to $100,000 less than theirs. Marty Ummel originally accused his realtor, Mike Little, of misrepresentation, breach of fiduciary responsibility, and fraud, but later retracted two of the complaints and just filed for breach of fiduciary responsibility. Within two hours of hearing each party's side of the story, the jury came back with a "not guilty" verdict for Mr. Little.
Despite the fact that Mike Little was found not guilty of any of the charges brought against him by the Ummels, his real estate career was essentially ruined. Though you may already understand real estate law, because of the amount of money at stake in a real estate transaction, it is always best to have a real estate lawyer on retainer, if only to protect yourself from frivolous suits such as the one Mr. Little had to deal with.
Why You Can Get Sued as a Real Estate Agent1. Failure to Disclose a Property Defect: The number one reason a realtor gets sued is because he or she fails to inform the new buyers about a major defect in the property. These defects can run the homeowners thousands of dollars into debt, which, if it is proven that the realtor knew about them, he or she will be liable for. A realtor can avoid being sued for this particular reason by having an inspector come in before the house is shown and by asking the homeowners to sign a document that details all of the known defects.
2. Breach of Duty: Real estate agents are obligated to always act in the best interests of their clients, and if they fail to do so, whether knowingly or not, they can be sued for not adhering to this common real estate code of conduct.
3. Selling in New Territory: If you are selling a home in new or unfamiliar territory, you want to be absolutely sure that you know everything there is to know about the neighborhood and surrounding geographic locations. If an issue should arise because of geography that you did not warn the new homeowners of, you could be at fault.
4. Giving Legal Advice: A real estate agent is not a real estate attorney and is not liable to give legal or financial advice.
5. Providing Misleading Information: The goal of all real estate agents is to close the deal, but if doing so means lying about the home, neighborhoods, or any other features that the client asks about, do not do it. Do not even commit a lie of omission, as it is the same thing as an outright lie. The commission is not worth it if the homeowners find out you were over-exaggerating or embellishing, as the misinformation could cost you your career.
6. Breach of Contract: A breach of contract in real estate often goes hand-in-hand with breach of duty. However, when selling a home, there are many contracts to sign. Be sure that each and every one has up-to-date and accurate information regarding the home, your job as the real estate agent, timeframes for finding a home, and any other essential terms that the buyers requested from you. If necessary, review your contracts with a real estate lawyer when taking on any new clients.
7. Not Protecting Your Clients' Information: As a real estate agent, you are given a lot of personal and financial information, and it is your duty to safeguard that information as you would your own. If your clients' information should be hacked, and you are in any way responsible, you will be held liable.
8. Not Giving Proper Recommendations: Though you may order an inspection before showing a home, once you are in the middle of a sale, it is also your duty to recommend an inspection before the deal is closed. This way the buyers know exactly what they are getting into, and cannot place the blame on anybody should issues arise after the deal is done.
9. Negligence: Negligence differs from fraud in that it lacks intent. Should you sell a home without knowing essential information on it, the buyers can build a valid case against you.
10. Injury: If one of your clients were to get injured during a showing, or if one person were to develop respiratory problems because of mold in the home, you may be liable.