The key to developing a good relationship in any business is to listen to what your customer says and pay attention to their needs. Not to mention, imagine the number of Real Estate E&O claims that in the long run had something to do with poor communication! In the March/April 2011 issue of Selling Power, John H. Melchinger offers 9 tips to become a better listener. Here is an excerpt:

1. Put aside all personal issues. Be attentive and concentrate on hearing what the speaker has to say.
2. Comment on what you hear, and individualize your comments: “Cheryl, that’s obviously very important to you.” If you train yourself to comment meaningfully, the speaker will know you are listening and may offer further information.
3. Show empathy. If you respond to human issues, people will respond to you.
4. Don’t ignore opportunities for humor. When it arises naturally our of a conversation, humor enhances what may otherwise be an overly somber situation. Avoid sarcasm, however, which is rarely humorous.
5. Be aware of nonverbal communication: silence, facial expressions, tone of voice, body gestures. These can be telling symptoms, but don’t allow these messages to be the basis for speedy conclusions.
6. Know the value of silence. A brief period of silence will generally cause the speaker to produce more in-depth responses and allow both of you to reflect on what’s been said, ask additional questions, seek further clarification, or provide more information.
7. Ask questions to clarify information. The best indicators that you hear and understand are your questions and how you ask them.
8. Be sure you are not making inaccurate assumptions. When the speaker leaves a point unfinished, finish it yourself and ask for agreement, or simply ask the speaker to finish it.
9. Be careful. Most people have an almost immediate grasp of the obvious, but few of us can grasp immediately what a speaker means to convey.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving a REALTOR^® calendar error 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 negligence.

A Real Estate professional was serving as the commercial leasing broker for a shopping plaza on behalf of the holder of a 15-year ground lease that included an option to renew for four successive five-year terms. The renewal was contingent upon the ground leaseholder giving written notice to the plaza owner nine months prior to the expiration of the lease. As part of his duties, the broker agreed to accept the responsibility of exercising the renewal option as well as those of the six retail tenants in the plaza.

Problem:
The ground lease and the retail leases were not timely renewed.

Mistake:
The leasing broker marked the wrong date in his calendar, therefore missing the deadline.

Result:
Although the first extension did not occur within the time frame allowed by the ground lease, the plaza owner, who discovered the oversight, still accepted the renewal. However, the retail tenants refused to renew their respective leases under the same terms despite the broker’s frantic efforts to salvage the deals. Five of the tenants notified the broker and leaseholder that they would be relocating, leaving much of the property vacant at the conclusion of the lease period. The broker attempted but failed to locate suitable tenants for the plaza, resulting in a significant shortfall in revenue for the leaseholder. A lawsuit was then filed against the broker alleging negligence and sought reimbursement for lost rental income. After several rounds of negotiations, the parties settled the litigation well into six figures.

Prevention:
If the broker took a moment to carefully review the lease agreements and establish an effective calendar diary system, the error could have been avoided. A sound diary system includes the creation of a backup measure in the event the first notification method fails. Furthermore, it’s always a good practice to conduct periodic reviews of your contractual obligations to ensure that they’re well understood and in compliance. Many lawsuits arise over simple clerical errors that cost the real estate community thousands of dollars in legal fees and settlements. It also results in spending time and effort to fend off regulatory complaints brought by unsatisfied clients, not to mention the possibility of license suspension or revocation.

Do you have a similar story involving negligence 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 our website for E&O insurance just for real estate professionals, www.pearlinsurance.com/eo, to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.

All too often, real estate prospects look to foreclosures as an easy way to buy property on the cheap. Although there are likely decent foreclosure deals available, purchasing a foreclosed home can come with a fair amount of headaches. Keep these in mind if your client decides to go ahead with acquiring a foreclosure.

1) Get it inspected by a professional.

Stipulate to your client that they need to get the property checked out by a certified professional home inspector, and don’t bid on houses that aren’t available for inspection. Don’t let your client base their buying decision on appearances alone; the home could have mold, pests damaging its structural integrity, an insulation problem, shoddy construction, asbestos … you name it. Your client needs to know how much work (and money) they will need to put into the home up front.

2) Consider factors that may have led to the foreclosure.

Is crime on the rise in the neighborhood? Are the schools not making the grade? Is the view not so pleasant? How long has the home been empty? Are there plenty of other foreclosures in the area? Foreclosures aren’t always due to a lack of money or budgeting skills; maybe the previous homeowner bought the house without realizing there was a particular blight on the property.

3) Be cautious if the house is currently occupied.

Keep in mind that some people involved in the foreclosure may be living on the property and may be difficult when it comes time to leave. Even with title in hand, your client could have a hard time evicting the unwanted tenants. And once they do leave, they may have retaliated by destroying the property. (This may not be an issue in certain areas.)

4) Advise your client against flipping.

Unless your client has an arsenal of cheap contractors and materials at their disposal, there always seems to be pitfalls along the way that end up costing more than the person looking to make a quick bundle bargained for.

5) Recommend to buyers that renovations are within the their budget.

Even for properties needing a seemingly modest amount of renovation, there’s usually more work and money involved than planned. In order to make the most of the foreclosure’s bargain price, the buyer should not go into further debt by taking out loans and losing money on interest. Have a home inspector detail all work needed and make sure the buyer has enough cash to fix it all.

6) Recommend they find a reputable lender.

The wrong lender might not spend as much time on a foreclosure case as on a standard real estate purchase, because they stand to make less money on the former. A good lender will research what your client’s best option is. Tell your client to ask a lot of questions—the lender should explain everything to your client very clearly. You should advise them to meet with a real estate attorney as well.

Pearl Insurance is a nationally known broker, marketer, and administrator that specializes in the design and administration of quality insurance plans for associations, affinity groups, unions, and large firms. In addition to providing real estate professionals with quality products and services for 30 years, their partnership with the XL Insurance companies (through Indian Harbor Insurance Company and Greenwich Insurance Company) solidifies their strength, allowing them to offer association members an A rated (by A.M. Best) E&O program. For more information about Pearl’s sponsored E&O programs, call 800.289.8170.

Information provided within this article is not to be taken as legal advice and is to be used for educational and illustrative purposes only.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving REALTOR^® acting outside of your 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 performing a function that is outside of your realm as a real estate professional.

A Real Estate agent listed an older residential property that needed a roof replacement because water was penetrating the attic and running down the walls. As part of the marketing strategy the sellers agreed with the agent that the best way to sell the home for a better price would be to have a new roof installed. In addition to fixing the water intrusion problem, it was believed that the enhanced curb appeal of the property would likely garner more interest.

Problem:
The contractor that was hired to do the work was not fully paid by the sellers when the work was completed.

Mistake:
After the marketing strategy was agreed to, the agent decided to select and hire the roofing contractor on behalf of  her clients so that they could focus on prepping and painting the water stains on the interior walls of the home. The sellers provided a check to the agent for the down payment required by the roofer, but it was the agent who signed
the contract order.

Result:
When the project was close to completion, a potential buyer tendered an offer on the property that the sellers quickly accepted. However, when the contractor wasn’t paid by the sellers for the balance due, he filed a mechanic’s lien against the sellers and the real estate agent for non-payment. The buyer then sued the sellers for specific performance and
demanded that either they or the agent pay the contractor to lift the lien. Following a two-month delay in the closing, the matter was resolved after the sellers and agent agreed to contribute equal shares to pay the contractor.

Prevention:
An agent should never select and hire any vendor to do work on sellers’ property—and should certainly never sign a work order on their behalf. By doing so, an agent becomes contractually liable to the vendor and may, as in this case, become the object of litigation when a buyer of the property attempts to enforce a Purchase Agreement. It’s also important to remember that most, if not all, real estate errors & omissions policies don’t provide coverage for claims based on or arising out of liability of others assumed under any contract or agreement. Making the simple decision to leave contractor selection and engagement to a homeowner will increase your chances of avoiding litigation from both the contractor and any potential buyer of property.

Do you have a similar story involving acting outside of your 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 our website for E&O insurance just for real estate professionals, www.pearlinsurance.com/eo, to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.

In light of a recent terrifying REALTOR shooting, we thought it was time to again share some safety advice for you to keep in mind in your daily practice in real estate. Please read and adhere to these 10 Tips to Open House Safety:

1. Upon entering a house for the first time, check all rooms and determine several “escape” routes. Be hyper-vigilant about your surroundings and a way out.

2. Make sure all deadbolt locks are unlocked to facilitate a faster escape. Be certain there are no obstacles in front of exits.

3. Check to see that if you were to escape by the back door, you could escape from the backyard. Frequently, high fences surround yards that have swimming pools or hot tubs. Find the door in the fence, or locate another way out.

4. Leave one of your business cards, with the data and time on the back, in a kitchen cupboard. Note on it if you were the first to arrive or if clients were waiting.

5. When prospects begin to arrive, jot down their car description, license number, and physical description.

6. When showing the house, always walk behind the prospect. Direct them, don’t lead them.

7. Watch what the prospects are doing at all times. Do not become preoccupied with viewing the home, and expect the unexpected.

8. Notify someone in your office, your answering service, or a friend or relative that you will be calling in every hour on the hour, and that if you don’t call, they are to notify the police immediately.

9. Inform a neighbor that you will be showing the house and ask if he would keep an ear open for anything out of the ordinary.

10. Don’t show alone—have someone from your office, a relative, or friend stay with you.

Source: Washington Real Estate Safety Council

REALTOR^® Magazine provides a lot of resources to help real estate professionals be safe in not only their open houses, but throughout their career. Read their 6 Dangers in Real Estate to further protect yourself in common REALTOR situations.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving REALTOR^® misrepresentation 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 not following standard office procedures.

A Real Estate agent listed a residential condominium in an age-restricted community that required, through its homeowners’ association (“HOA”) covenants, that at least one person residing in each unit must be at least 55 years old. Fortunately for the agent and his seller, he was able to sell it quickly to an out-of-state couple who met the age restriction requisite and who planned to live in the property after their retirement two years later.

Problem:
The buyers intended to have their granddaughter live in the property until they retired while she attended a nearby university.

Mistake:
Before the property went under contract, the buyers questioned the agent on whether the restrictive covenants would allow this living arrangement. The agent informed his clients that it would create no problems since the buyers, who would be the actual owners of the unit, satisfied the age condition.

Result:

Soon after the close of escrow, the buyers’ granddaughter moved into the unit and applied for a parking permit only to be informed by the HOA that she and her grandparents were not in compliance with the age restriction covenants since she, as the only resident, did not meet the age requirement. The HOA then declared that she would have to vacate the property. And after unsuccessfully pleading with the HOA Board of Directors to waive the age restriction, the buyers sued the real estate agent, his broker, and the seller alleging negligent and intentional misrepresentation and demanded that they provide alternative housing for their granddaughter until she graduated from college. Following extensive negotiations, the matter was resolved.

Prevention:
The agent incorrectly assumed that there would be no problem with a college-age woman occupying the unit as long as the owners met the age requirement. To complicate matters further, there was a dispute as to whether the agent actually provided a copy of the HOA covenants to the buyers before they executed the Purchase Agreement. If the agent was able to demonstrate that the buyers acknowledged receipt of the covenants in writing, he would have been able to put himself and his broker in a better position to defend the case. Having the ability to prove that the buyers had the opportunity to review the HOA documents would have certainly helped in that endeavor.

Do you have a similar story involving misrepresentation 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 our website for E&O insurance just for real estate professionals, www.pearlinsurance.com/eo, to find out more about our quality Errors & Omissions program, including policy features, risk management tools, and much more.

4.  Recommend expert inspections from reputable and qualified specialists. Recommend a qualified home inspection. Advise that the inspection company or other consultant have E&O insurance. Provide choices for the client. Counsel clients before the inspection. A home inspection is none of the following: appraisal, pest control certification, certification of any kind, FHA/VA inspection or a warranty. A home inspection is a resource for clients to make decisions of two kinds: immediate and during the course of ownership regarding maintenance. Urge the buyers to go on the inspection with the inspector. If the buyers waive inspections, get your recommendation and their waiver in writing.

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3.  Do not speak carelessly. As a professional, a real estate licensee must exercise a higher degree of skill and diligence than a non-professional. Negligent misrepresentation is a major cause of lawsuits. Specifically, the broker is charged with more than a layman’s knowledge of the real estate business.
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2. Learn to be comfortable with your uncertainty. Know what hat you are wearing. If you do not know something, say so, and then get the answer from a qualified authority (from your principal).

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1.  Why is it so important to document your files, keep notes, and maintain records? When you are sued by your clients possibly years after the transaction and they have selective memory—this way you have documentation on the advice and counsel you gave them (admissible evidence). It also helps you remember what you did and what you said. Pride of authorship (specificity) is the key. Use confirming letters, “chron logs,” emails, mobile phone logs, etc. Get key points in writing and do so before escrow closes. Treat your files as if you will get sued. Recognize that the statute of limitations for fraud (in California) is three years and four years for breach of fiduciary duty; both from the date of discovery.

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