Every business has liability to customers or clients of one nature or another. The practice of real estate is no exception. Litigation haunts us all. It is not uncommon real estate clients complain to a Realtor’s Broker about a perceived problem. After the complaining comes lawsuits. Defendant is a terrible new first name. Purchasers of residential real estate can claim damages for many reasons, such as mishandling of deposit monies , negligence, failure to disclose material facts and many more issues.
Your commission appears to home buyers to be extravagant. An angry client, armed with a lawyer, will sue both the Realtor, the Broker and the seller or buyer as the case may be. Home inspectors may be included if property condition is at issue.
Litigation is expensive. Hopefully, you Errors and Omissions policy protects you, including covering the cost of legal representation. If it’s resolved, will you E&O carrier cancel your policy? You may be blameless, but the emotional toll may be difficult and your reputation may suffer even if you are blameless.
Thus avoidance of liability as a day to day goal is the best policy. There are some steps, that if followed, will help you to reduce and even eliminate your liability exposure.
Real estate related lawsuits emanate from a client feeling they were not treated properly. After settlement and occupying the home for the first time, unexpected unwanted surprises are discovered. Latent defects, an undiscovered problem that falls within the category of material facts requiring disclosure may turn your client into a Plaintiff.
Alban Inspections can only view this issue from our perspective as home inspectors. Hopefully you recommended Alban because you have confidence that we will be thorough and leave your client feeling satisfied with the home inspection experience. We are your first line of defense with respect to the physical condition of the property.
Here are some ideas on how to reduce your potential liability arising from a transaction:
1. The best way to reduce or eliminate liability is to establish rapport with your client. Use active listening techniques to keep tabs on the level of satisfaction with our work on behalf of the client. Open ended questions can be an effective technique to gauge your client’s satisfaction level.
2. With respect to the property and its condition, recommend a fully qualified and certified home inspector. Members of the American Society of Home Inspectors (ASHI) inspect under the most rigorous inspection standards in the industry.
3. Ensure that your client understands that the inspection is basically a visual inspection of accessible areas and the inspector has no x-ray vision and cannot predict future events. Walls, furniture, inaccessible areas may prevent the inspector from gaining access to areas that potentially, if opened, would disclose a defect.
4. Do not avoid discussing environmental issues. Ensure you make full disclosures and make sure these are made in writing. “He said versus she said” without documentation leads to uncomfortable situations.
5. Keep your own Professional Liability Insurance in place without fail.
6. With respect to future failure of components of the home after the home inspection, when your client selects Alban, we offer for no additional cost a 90-Day Home Protection guarantee that will pay for repair costs of appliances that breakdown or pay your client a replacement stipend.
7. Make it a practice to routinely attend every home inspection. Observing the home inspector at work helps ward off liability. Your client knows you have held their hands at EVERY step of the transaction. We have inspected for Realtors® who do not attend and their clients feel adrift. While there, you should ensure your client is attentive and takes advantage of the educational aspect of the home inspection
8. Avoid conflicts of interest in every aspect of a transaction. Ethical home inspectors do not try to sell repair services. This is prohibited by ASHI. Never, never recommend a relative or a service company in which you have a financial stake
9. Document every aspect of the transaction by keeping a running log. Record advice given to your client, showing when and what was stated.