A thriving real estate career—that’s the dream, right? But how do you get there? Most savvy professionals understand it takes drive, passion, a commitment to great customer service, and an intimate knowledge of the market.
Each of these attributes will certainly help you succeed, but they won’t protect you from the risks you face as a real estate professional. When things go wrong, some clients look for reasons to hold you liable for anything, even if you aren’t at fault.
The resulting lawsuits can be costly to your career by putting stress on your finances, reputation, and time. That’s why protecting yourself and your business against claims is essential to your long-term prosperity. Follow these eight proactive measures to help safeguard your success.
1. Keep Your Clients Happy
Clients are much less likely to take legal action against you if they like you. Maintain excellent client relationships and provide unfaltering real estate services as your first lines of defense against lawsuits.
Consider creating a detailed customer service policy that all employees must follow. Even if you are an independent real estate professional, you should create and follow such a policy.
These practices aren’t guaranteed to prevent legal action from coming your way, so make sure to keep errors and omissions (E&O) insurance that fits your professional needs.
2. Avoid Using Non-Standard Forms Whenever Possible
Unless the form or contract that you want to use doesn’t exist, always use contracts created and/or approved by your local real estate board. When you do this, do not change a single word on the document. The language and explanations within board-approved forms and contracts cannot be misinterpreted as something that you or your firm fabricated to deceive anyone.
3. Maintain Thorough Records of Every Customer Interaction
Keep a thorough record of every customer interaction that you make. This may stop a legal attack before it gets off the ground. You will have concrete evidence to refute any falsehoods that may be spoken against you, preventing a legal claim from gaining traction.
At a minimum, your records should include the following:
- A journal that records the time and date of every customer interaction
- Documentation of every phone call (this includes mobile phones)
- Policies that require a client to sign off on certain actions
Make sure that your recordkeeping endeavors are well known by everyone, as this can act as a deterrent to someone thinking about pursuing a case wherein all of the arguments are your word against theirs.
4. Ensure That Everyone You Work With Has Their Own Professional License and Insurance
People won’t just sue you for what they claim you have done. They will sue you for what they claim one of your business associates has done, and they may claim that you made a negligent referral.
No matter how long you have known a business associate, you cannot always be certain about the outcomes of their interactions with customers. Make sure that your associates are fully licensed and have their own E&O insurance. The licensure ensures that you cannot be sued for referring a customer to a non-professional entity, and their insurance will act as an additional shield for you.
5. Don’t Give Advice on Anything Outside of Your Expertise
No matter how much experience you have with practices like home inspection or surveying, don’t work outside your area of expertise. If someone pursues any action based on your advice, and it backfires, then they may try to hold you liable.
If a client asks about specific services not related to your responsibilities, simply explain that you are no expert. Recommend that they seek the advice of a professional.
6. Have a Real Estate Attorney Audit Your Business for Potential Liability Risks
Right now, you may be at risk for a lawsuit without knowing it. Hire a real estate attorney to review your customer interactions, transaction records, and all aspects of your business to find and eliminate any liabilities that put you at risk for a lawsuit.
7. Make All Responsibilities Within Your Firm Clear
If a customer gets bad advice from someone who shouldn’t be giving it, or if different team members give conflicting advice to the same person, then you could have a problem. The only way to prevent this from happening is to make the responsibilities of all of your employees clear.
Let all of your administrative employees know that they are not, under any circumstances, to give real estate advice. All agents within your firm should never give advice to a client that is not their own.
8. Minimize the Cost of E&O Insurance Claims by Avoiding Them Altogether
You cannot always avoid facing an E&O insurance claim. For those situations, an E&O policy can help. However, you should be doing everything in your power to reduce your risk. By taking action to prevent claims, you not only protect your business and help ensure your long-term success, but you also significantly reduce the cost of your insurance for both the long and short term.