Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving a REALTOR overstating a property’s condition to avoid a similar legal showdown happening to you in your everyday real estate career. And be sure to have a good Real Estate E&O Insurance policy in place to protect you in case you find yourself in the middle of a court battle over misrepresentation.

A real estate agent accepted a listing to sell an older residential property that had been renovated by the sellers. While the sellers only had the property for a year, they had spent a significant amount of money refinishing the hardwood floors, painting the walls and ceilings, and doing some minor electrical and plumbing upgrades in the kitchen and bathrooms.

Problem
Although the property looked to be in excellent condition with the cosmetic improvements, the agent marketed the property in the Multiple Listing Service and sales brochure as being “totally renovated.”

Mistake
The agent’s advertising material and verbal representations overstated the improvements that were made to the property.

Result
The agent was approached by first-time homebuyers who mistakenly believed that the home’s electrical and plumbing systems were completely upgraded. They submitted a purchase offer but waived their rights to a home inspection because they lacked the money to pay for it. Shortly after the close of escrow, they discovered that the electrical and plumbing systems were old and deteriorating and would have to be upgraded. They subsequently sued both the agent and her sellers alleging that they misrepresented the true condition of the property and demanded a judgment equivalent to the cost of the upgrades. The matter eventually settled before trial.

Prevention
During the process of selling real estate, always avoid using adjectives that overstate improvements to property. More often than not, these adjectives lead to higher expectations and eventual dissatisfaction of buyers who may believe that they didn’t receive what they bargained for. Also, be certain when stating facts about the property such as age or structure, and don’t gloss over potential buyers’ concerns. It is important to never oversell (“With a little paint, I’m sure this would be great!”). No one wants to be the recipient of a lawsuit and a loss of reputation.

Do you have a similar story involving complaints regarding acting overselling a property to share with us? Send us your learning experience or just let us know what you think about this one! Just leave a reply below!

If you have any questions about Pearl’s Errors & Omissions Insurance for real estate professionals, give us a call at 800.447.4982—whether you’re looking for a new E&O policy or have questions about your current one. We’d love to hear from you!

You can also visit www.pearlinsurance.com/eo to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving a REALTOR acting outside of her expertise to avoid a similar legal showdown happening to you in your everyday real estate career. And be sure to have a good Real Estate E&O Insurance policy in place to protect you in case you find yourself in the middle of a court battle over misrepresentation.

A residential real estate agent was approached by an industrial organization to help locate new property because it had outgrown its existing manufacturing space. The agent had handled several home sale transactions for employees of the company when they transferred in and out of town and had subsequently developed an excellent reputation with the company. The owners of the plant decided to reward the agent by engaging her services in their search.

Problem
The agent, while well-versed in residential sales, was inexperienced in commercial transactions.

Mistake
Unfamiliar with zoning issues beyond a rudimentary understanding, the agent located a piece of property that was suitable for commercial but not industrial construction—something necessary for the operation of her client’s business. Compounding the problem, the agent failed to obtain a Buyer’s Agency Agreement that contained a section requiring the client to explicitly state the type of property it was seeking. Ultimately, the commercially-zoned property was acquired after the agent represented to her client that it would be ideal for its needs.

Result
Following the close of escrow, the city denied the client’s application to construct the desired building since the intended operation did not comply with zoning regulations. A lawsuit ensued against the agent and her broker after the client’s zoning appeal failed. The lawsuit sought significant compensatory damages, including lost revenue and attorney’s fees, and asserted that the buyer relied on the expertise of the agent and broker. The buyer also alleged that they should have known that industrial zoning was required because its existing operation was zoned industrial. Faced with a likely adverse verdict at trial, the matter was resolved outside of court for a six-figure settlement.

Prevention
Mistakes often occur when a real estate professional dabbles outside his or her area of expertise. In this case, the agent should have followed pre-established office procedures and asked for assistance from her broker. The broker could also have avoided litigation if he closely supervised her throughout the transactional process. Soliciting the counsel of experts in commercial real estate could have prevented the end result.

Do you have a similar story involving complaints regarding acting within your area of expertise to share with us? Send us your learning experience or just let us know what you think about this one! Just leave a reply below!

If you have any questions about Pearl’s Errors & Omissions Insurance for real estate professionals, give us a call at 800.447.4982—whether you’re looking for a new E&O policy or have questions about your current one. We’d love to hear from you!

You can also visit www.pearlinsurance.com/eo to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.

Have you ever been involved in a real estate transaction where the buyers ask the sellers if they can move in early? If the buyers’ lease runs out on Aug 1 (or they for some reason are stuck without a place to live) and the closing date for the property is not until Aug 6, you may be caught in this predicament, however innocent the request may be.

In Inmen News today, Bernice Ross explains the consequences that can occur if the sellers agree to let the buyers take possession early. In a nutshell, advise your seller clients not to allow this, or at least recommend they draw up a lease agreement and demand a security deposit. So much can happen in the short time between the sellers moving in and the official closing. Help your clients avoid these major mishaps with advice from “Pre-Closing Horror Stories.”

Are you being too passive in your lead generation techniques? Are you putting your information out there and passively hoping for the buyers to come to you? Don’t fall into these “real estate sinkholes” by putting all your eggs in one marketing basket. You need to be proactive in your marketing and lead generation campaigns.

Avoid getting into a real estate rut by following these marketing tips from Bernice Ross, CEO of RealEstateCoach.com, available at Inman News.

Real estate professionals are making the most of the recent housing market hurdles by using social media for real results. From sharing videos, listings or advice with their communities and prospective buyers or sellers, REALTORS are implementing new and effective ways to boost their business with a variety of social media tools. Read this article from Mashable.com to find new and innovative ways for real estate agents to get their message out.

From connecting with buyers and sellers to networking with industry peers and lending expert advice, there are many ways to utilize social media as a real estate professional. Are YOU using any of them?

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving Documentation to avoid a similar legal showdown happening to you in your everyday real estate career. And be sure to have a good Real Estate E&O Insurance policy in place to protect you in case you find yourself in the middle of a court battle over misrepresentation.

A real estate agent listed and sold a residential property containing numerous defects. Because of the defects, the home was sold “as is” with a general “handy man special” comment published with the Multiple Listing Service.

Problem
Following the close of escrow, the buyer moved into the property and soon discovered the extent of renovation was more than he anticipated. He subsequently called the real estate agent and asked for copies of the transactional documents. A year later, the buyer filed a claim against the seller and agent, alleging he never received a copy of the seller’s property disclosure statement prior to the close of escrow and that the property had more defects than he was led to believe.

Mistake
Unfortunately, the real estate agent discarded his transaction files six months post-closing, along with the seller’s property disclosure statement naming the numerous defects.

Result
Without the transactional file, the agent was unable to prove that he had provided the seller’s property disclosure statement to the buyer, even though he specifically remembered faxing it to the buyer’s office.

Prevention
It is very important not to destroy your files following a closing. Some states have a statute of limitations of ten years for breach of contract, and many lawsuits are brought years after a transaction has closed. If your files support your story of the transaction, odds are any claim made against you will be dropped. Attorneys don’t want to fight irrefutable evidence. Remember to include in your files: 1) the date and time of all meetings or phone conversations and a list of all participants, 2) e-mails and faxes, and 3) verification that what you say and write is correct. Be sure to keep a record of all verified information, contracts, agency disclosures, seller disclosures, and closing documents with the appropriate signatures, and never sign anything for your client.

Do you have a similar story involving complaints regarding lost or destroyed files to share with us? Send us your learning experience or just let us know what you think about this one! Just leave a reply below!

If you have any questions about Pearl’s Errors & Omissions Insurance for real estate professionals, give us a call at 800.447.4982—whether you’re looking for a new E&O policy or have questions about your current one. We’d love to hear from you!

You can also visit www.pearlinsurance.com/eo to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.

Good news for homebuyers and REALTORS: The Senate has approved an amendment to extend the tax credit closing deadline for those who were under contract by April 30! Read this article from Inman News to learn more.

According to real estate and lending experts, mortgage lenders will try to recoup their losses from home sales and foreclosures that did not return enough money. They will be suing homeowners who have ransacked their houses under foreclosure or who have walked away from underwater properties in order to discourage such behavior in the future.

Read the article in REALTOR Magazine here: http://www.realtor.org/rmodaily.nsf/pages/News2010060902.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving Documentation and Verbal Contracts to avoid a similar legal showdown happening to you in your everyday real estate career. And be sure to have a good Real Estate E&O Insurance policy in place to protect you in case you find yourself in the middle of a court battle over misrepresentation.

A homeowner listed a single-family house for sale and specifically excluded major appliances and window treatments from the listing—intending to negotiate those items after an offer was made. Three weeks later, a verbal offer was received from an agent representing two buyers for the house as listed. After a few days of negotiations over price, the sellers accepted the buyers’ offer and a sales contract was drawn up.

Problem
The day before the final closing, the sellers moved all their possessions out of the house—including all appliances and window treatments. The next day, during their final walk through, the buyers were surprised to find the appliances and window treatments missing. It was their understanding that both were included in the sale.

Mistake
When the buyers instructed their agent to make the initial offer on the house, they included a requirement that the purchase would include all existing appliances and window treatments. Unfortunately, the buyers’ agent failed to convey that contingency in the initial offer and subsequent negotiations only discussed the price of the house.

Result
When the error was discovered during the final walk through, the buyers’ agent promised she would replace the appliances and window treatments to prevent the sale from falling through. Based on that representation, the buyers went through with the closing and moved into the house. However, when the agent realized the cost of replacing the missing items would exceed $20,000, she reneged on her promise and the buyers sued. Ultimately, the agent relented and paid the buyers the cost of replacing the missing items plus their attorney’s fees.

Prevention
Many claims are the result of simple errors that are best avoided by implementing routine quality controls. In this case, a claim could have been avoided had the buyers’ agent double-checked the details and confirmed the terms of the offer in writing. Creating and following an internal “quality control” checklist will help mitigate the chances of a claim. Finally, be careful what you promise. Once the agent “promised” to replace the missing items, they created an agreement with the buyers that they would ultimately become obligated to fulfill.

Do you have a similar story involving a forgotten contingencies or verbal agreements to share with us? Send us your learning experience or just let us know what you think about this one! Just leave a reply below!

If you have any questions about Pearl’s Errors & Omissions Insurance for real estate professionals, give us a call at 800.447.4982—whether you’re looking for a new E&O policy or have questions about your current one. We’d love to hear from you!

You can also visit www.pearlinsurance.com/eo to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving a Conflict of Interest to avoid a similar legal showdown happening to you in your everyday real estate career. And be sure to have a good Real Estate E&O Insurance policy in place to protect you in case you find yourself in the middle of a court battle over property you may purchase.

After completing a comparative market analysis, a Real Estate agent entered into a listing agreement with an owner of residential property. Shortly after signing the agreement, the agent expressed interest in purchasing the property himself and presented the seller with a purchase offer. The agent and seller agreed on a price and proceeded to close escrow.

Problem
The agent never placed the home into the Multiple Listing Service (MLS) and the price he paid for the property was significantly below its true market value. To make matters worse, the agent sold the property a short time later for approximately $30,000 more than what he paid.

Mistake
By neglecting to place the property into the MLS, the agent did not give the seller an opportunity to elicit the best possible sale price for the property—ultimately failing to put the best interest of his client first.

Result
The seller sued the agent and his broker, alleging they had taken advantage of her, and requested she be awarded compensatory and punitive damages. When the agent and broker turned the claim into their real estate errors & omissions insurance company, they were denied coverage because their policy did not offer protection for any individual or entity that had a financial interest in the purchase of property. In the end, the agent settled with the seller for $30,000 and incurred approximately $11,000 in legal expenses.

Prevention
The agent could have avoided professional and personal claims against him and his broker by entering the property into the MLS or by not purchasing it altogether. However, if he still decided to purchase the property, providing the seller with full disclosure of the potential conflict of interest prior to closing could have also prevented the claim from being made.

Most, if not all, real estate errors & omissions insurance policies do not cover situations where an individual or entity of a brokerage has a financial interest in the purchase of property. So before you enter into any unique transactions, familiarize yourself with the terms and conditions of your errors & omissions insurance policy, seek clarification on unclear terms and conditions, and consult with your insurance agent or carrier to ensure your transactions will be covered.

Do you have a similar story involving a Conflict of Interest or purchasing property to share with us? Send us your learning experience or just let us know what you think about this one! Just leave a reply below!

If you have any questions about Pearl’s Errors & Omissions Insurance for real estate professionals, give us a call at 800.447.4982—whether you’re looking for a new E&O policy or have questions about your current one. We’d love to hear from you!

You can also visit www.pearlinsurance.com/eo to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.