The last thing you want to worry about is heading to court. While many Realtors share the nagging fear of this happening, there are ways to be proactive and avoid court. All real estate professionals should be aware that errors and omissions (E&O) claims can have an impact on their careers. In a 2010 study by Insurance Journal, 14.4% of agencies indicated they would refuse to hire a qualified employee if they were responsible for a claim.
For both real estate agency owners and employees alike, it’s important to make sure everyone is doing everything in their power to reduce the risks of E&O claims. Here are a few things to look for:
Red Flag #1: Angry Buyers
Usually, having angry buyers on your hands is a symptom of another issue within your process. However, it should go without saying that angry buyers and clients should be the first warning of impending danger. It’s also an opportunity to go the extra mile and resolve the situation whenever possible.
Red Flag #2: Not Confirming Everything in Writing
Did your client act against good common sense and your recommendation? While we may just shrug off the occasionally irrational and foolhardy penny-pinching clients, it’s important to realize that documenting these issues in writing can save you hours of headaches and a trip to court.
Red Flag #3: Juggling too Many Professions
While all real estate agencies want to be as helpful to their clients as possible, it is important to realize that an offhand comment can lead to trouble later. If your client needs to talk to an accountant, attorney, engineer, or architect, kindly remind them that your expertise is in real estate. For new real estate agents who may be used to more casual conversation through text messages or emails, it’s important to make sure you’re not caught giving unqualified statements that fall outside of your expertise area.
Red Flag #4: Economic Downturns
While you can’t control the economy, keep in mind that economic factors may aggravate or encourage what might have been a minor issue. As a real estate agent dealing with both buyers and sellers, it’s critical to be on high alert during economic downturns.
Red Flag #5: Dealing with Sloppy Property Managers or Homeowners
While you probably prefer to deal with the most professional buyers and sellers, sometimes you work deals that are less than ideal. It’s encouraged to back away from situations that make you feel uncomfortable, such as working with sloppy property managers or companies that have a reputation for being litigious. However, if avoidance is not possible, be sure to exercise extra caution in your business proceedings.
Red Flag #6: Inexperienced or Poorly Trained Staff
Have you been too busy lately to check up on your staff? Many claims start on technicalities or minor problems that a checklist could have prevented. For both office staff and external agents, great care needs to be taken in training and mentorship. It’s easy for a new real estate agent to forget to give a recommendation or disclosure that would have been extremely obvious to a more experienced agent. At the same time, minor issues, like office staff sending documents to the wrong location, can cause problems.
Red Flag #7: Client Data Security
Because digital technology continues to grow, you should periodically review your firm’s cyber security plan. If you don’t take measures to prevent a cyber breach, you risk compromising your clients’ data, which could lead damage your firm’s reputation.
Red Flag #8: Paperwork Backlogs
While delays in paperwork may seem like a minor factor in the success of a business, they can often lead to larger issues. All employees and owners should be aware that much of the paperwork associated with real estate sales is time-sensitive. With the expectations of buyers increasing with the speed of digital technology, even minor delays can easily create headaches.
Recognize the Warning Signs
If you recognize any of these red flags as problems within your own firm, it’s important to realize that it’s not too late. While some outside factors like a bad economy or angry clients may not be in your control, there are steps you can take to minimize your risk of a liability claim. By recognizing the key warnings signs, you are already on your way to managing your risk and protecting your firm from potential litigation.