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Avoid getting sued: 5 tips for real estate pros

Real estate professionals can avoid getting sued by managing their risk and being aware of the true vulnerabilities in the industry. Hint: lawsuits aren’t always over contracts.

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avoid getting sued

Real estate is prime for lawsuits

Let’s face it, real estate is a hotbed for lawsuits, both reasonable and frivolous. For some reason, many believe that a real estate license on the wall means endless wealth, although more agents barely scrape by than those that thrive. Regardless of wealth and means, all industry participants from the licensed assistant to the big box broker are vulnerable.

According to a recent survey by the National Association of Realtors, 78 percent of respondents are not covered by errors and omissions insurance, a shockingly high number revealing the true vulnerability of the industry.

Ted Devine is the CEO of insureon, an online insurance agent for small businesses, and prior to insureon, he held top leadership positions with Aon Corporation, including CEO of Aon Re and, more recently, was President of Aon Risk Services. We asked Devine how real estate professionals can manage their risk, and he offered the following five tips to help avoid lawsuits:

5 ways to avoid getting sued

You’re responsible for keeping your clients’ data safe. If you store sensitive client information (including Social Security numbers, bank account info, or other important details), you have an obligation to keep it secure. Unfortunately, hackers and data thieves have major financial incentives to steal that data. If you don’t already have data-security measures in place, implement them immediately: antivirus software, regular password updates, encrypted storage, backup storage, and limited access to sensitive data among your staff. Should all else fail, a Cyber Liability Insurance policy will cover the costs of a data breach and related lawsuits if your business is victimized.

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You could be held liable for advice you give – or don’t give. Ever had a client skip a house inspection or some other key step in the home-buying process? It can be a nail-biting experience as you wait to see whether anything will go wrong. What’s worse, you can be held liable if you failed to properly instruct your client about the potential fallout of skipping a key step. To minimize your advice-related liability risk, insist that your clients sign waivers whenever they chose to skip an important step in the purchasing process. And to protect your finances from unhappy clients who decide to sue you, invest in a robust Errors & Omissions Insurance policy, which will pay your legal defense costs for even frivolous claims, as well as any judgments you’re found to owe.

Sometimes, people steal. An open house presents a prime opportunity for thieves to nab valuables and even keys that allow for later entry. To minimize the chance of theft, encourage clients to lock up valuables and remove spare keys from view. To avoid liability for any thefts that do occur, include a hold-harmless clause in your contracts with clients and encourage them to update their Homeowner’s Insurance to include coverage for items stolen without evidence of a break-in. In addition, if you notice that something is amiss after a showing, contact police immediately. Doing so will help you avoid charges of liability later.

Your car insurance isn’t as good as you think it is. Drive a personally owned car for work all day? Do your employees do the same? Be aware that your personal auto insurance may not cover you for accidents that happen while you’re on the clock. To ensure that you’re covered in the event that you or one of your team gets injured (or injures someone else) in an accident during the work day, invest in Hired or Non-Owned Auto Insurance, which supplements a driver’s personal auto coverage.

Slips and trips still cause lawsuits. Rain and ice don’t just make for bad open house weather, they increase the likelihood that your clients will lose their balance, fall, and hurt themselves on your watch. Even if you’re away from your offices (e.g., at a property you’re showing), you can be found liable for a client’s slip-and-fall injury if they choose to sue. Luckily, General Liability Insurance covers the costs associated with legal actions related to third-party injuries, whether they happen at your office or elsewhere.

The takeaway

Real estate lawsuits are not always contractual, and real estate courses can only teach an individual agent so much about their risk and liability, especially when it comes to the more overlooked aspects of responsibility, like slips and falls. Many think that these types of lawsuits are restricted to major retailers or grocery chains, but the opposite is true.

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Written By

Marti Trewe reports on business and technology news, chasing his passion for helping entrepreneurs and small businesses to stay well informed in the fast paced 140-character world. Marti rarely sleeps and thrives on reader news tips, especially about startups and big moves in leadership.

1 Comment

1 Comment

  1. Patty

    November 4, 2013 at 2:28 pm

    Interesting to see how many risks you may be susceptible to that you do not realize, definitely important to make sure your insurance covers everything. Have advice on any others that the article didn’t cover? Thanks for the post! Great info.

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