Errors and omissions insurance can help real estate professionals deal with the professional liability risks that come with their job. When you buy from Insureon online, you can get free quotes.

Because they deal with expensive real estate deals, real estate and title business owners are more likely to be sued for errors and omissions (professional liability). Just like there are thousands of ways a real estate deal can go wrong, there are also an infinite number of ways someone could sue your small business.

Someone could sue you if:

A buyer who is unhappy with your business has buyer’s remorse and says you didn’t do what was best for them.
Your advice doesn’t live up to what a client wants.
You don’t write down decisions or actions you take.
A client says you didn’t tell them about water damage in the house and is trying to get you to pay for the cost of getting rid of the mold.
Professional liability suits can be brought against you even if you don’t do anything wrong. Anyone who thinks that your services caused them to lose money can file a lawsuit against you.

If you want to avoid E&O lawsuits, you need to know what can cause them and how to handle your professional liability risks.

Why people sue real estate agents and title brokers

What can lead to a $1 million lawsuit against your real estate or title company business? These situations often lead to E&O claims:

Lie about the property’s condition, boundaries, or size
Secrets kept
The buyer did not check the information the seller gave them.
Water damage, infestations, or sewage or septic problems that haven’t been reported or found
There were mistakes in the home inspection, like the inspector not noticing cracks in the foundation or a roof that was leaking.
Not following your state’s real estate rules (like fair housing rules)
misunderstanding of zoning rules
Comparative market research report has a mistake
Not accurate evaluation
giving bad or wrong advice without meaning to
Bank mortgage mistake
Breach of trust
If a buyer says that your MLS listing exaggerated the property’s features, for example, they could sue your real estate company and say that your description lied about what the listing had to offer.

How to deal with the risks of professional liability in real estate

A thorough risk management plan can help you avoid the things that cause people to make mistakes and leave things out. These things could be:

Set up procedures that everyone follows.

Make sure you treat all of your customers the same, no matter how much money they have. Before you help someone buy or sell a home, you should always know the latest fair housing laws. You won’t mess up that way.

Keep track of client communications

If someone sues you for professional liability, you will need to show proof that your business isn’t responsible for any mistakes or carelessness. Make sure to write down and keep safe all communications with clients, but especially any problems that came up during the process.

When you pick inspectors for your clients, be careful.

Let’s say you help a new home seller sell their home. After the deal was done, the buyer found problems with the property that let water in. But the inspector you hired didn’t notice any of these supposedly wrong things.

The buyer then decides to sueyou be cause it was your job to choose a home inspector who specializes in foundations and roofs. In order to avoid this, make sure you check out your specialists’ reputation, skills, and references.

Do not give advice that is not in your area of expertise.

Buyers depend on your knowledge to help them decide what to buy. Not giving your opinion is the best thing to do when you’re not sure what the right answer is. Direct your client to someone who can give them the help they need.

Don’t lie about or exaggerate the features of a property.

Before telling the buyer something, you should always check the information you get from a seller. If you repeat the seller’s false information about the property, you could be sued for someone else’s mistakes (or outright lies).

For example, let’s say the seller says the house is 1,582 square feet and you list it as such. If the house turns out to be only 1,282 square feet, the buyer could sue for the difference in value because of the square footage error.

List any problems with the property

Don’t sell a house without telling the buyer about its problems. If you don’t, you could be sued for negligence and breach of fiduciary duty.

In this example, let’s say you are a real estate agent helping people sell their homes. If flaws that weren’t disclosed are found after the deal is done, the buyer could try to get your small business to pay for repairs now and in the future.

Remember what you said.

Don’t promise something you can’t keep, or you could get sued. To follow this rule, you should never say ahead of time that a seller will pay for closing costs or that a property can be bought or sold for a certain price.

Set due dates for things.

There are due dates in real estate deals to make sure the sale goes smoothly. Make sure you turn in your paperwork by the due date so you aren’t the cause of any delays. If you don’t, agreements could be suddenly canceled.

What E&O insurance does for your real estate business to save you cash

A realtor who was on the TV show “Million Dollar Listing” was sued because he was said to have flooded a client’s home. The lawsuit says that real estate agent Matt Isbell showed a possible buyer an empty condo but forgot to turn off a gas fireplace before leaving. The sprinkler system went off a few days later because of the heat from the fireplace. This filled the house with water and caused about $200,000 in damage.

Your small real estate or title company shouldn’t fail because of an unhappy customer. Instead, make a thorough plan for managing risks and make sure you have errors and omissions insurance in case your efforts to avoid problems aren’t enough.

A professional liability insurance policy protects your real estate brokerage business from:

Costs of a legal defense
Clients who are owed money because of problems with your work or advice
Discrimination by a third party
Damages as punishment
Joint ventures as safety nets
Language used for final decisions on fraud claims
Liability for spouse
Personal injury crimes
Extended reporting period for both sides
Duty to defend means that your provider plans the defense of your business.

Other important policies that small businesses that buy E&O insurance should know about

When it comes to managing risk, errors and omissions insurance can be very helpful. But you should also think about these other small business insurance policies to fully protect your company from losing money:

This type of insurance covers common business risks like hurting customers or damaging their property, hurting people with ads, and breaking copyright laws. It keeps your small business safe from the high costs of lawsuits and makes it easier to get leases and contracts.

Policy for business owners: A BOP saves you money by combining general liability insurance and commercial property insurance into one package. Most third-party lawsuits and property damage are covered by this.

Commercial auto insurance: Most states require businesses that own vehicles to have insurance on those vehicles. If an accident happens with a business vehicle, this policy will pay for your legal fees, medical bills, and damage to other people’s property.

Hired and non-owned auto insurance (HNOA) protects you from liability in case of accidents involving business-owned, leased, or rented cars.

Cyber insurance protects you from the financial harm caused by data breaches and cyberattacks. It is also called cyber liability insurance. It includes things like telling the customer, checking their credit, legal fees, and fines.

With Insureon, you can get quotes from reputable insurance companies for your real estate business.

Fill out Insureon’s simple online form right now to get E&O and other types of business insurance quotes from top-rated U.S. carriers. The coverage for your small business can start right away, and you’ll get your E&O certificate in less than 24 hours.

 

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