Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving disclosure 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 failure to disclose.

A real estate agent listed a residential property on behalf of sellers who were involved in ongoing litigation with their neighbors over ownership rights to a driveway that straddled the property line. The neighbor was attempting to prevent the sellers from using the driveway because of the encroachment.

Problem:
In the course of the litigation, the neighbor filed a lis pendens (Latin for “a suit pending”), which provided the sellers with notice that there was a claim on the property. The recording of a lis pendens informs the general public—and particularly anyone interested in buying or financing the property—that there is this potential claim against it.

Mistake:
Because the property was located in a state where a Seller’s Property Disclosure Statement was not required, no written publication as to the property’s legal status was provided to potential buyers. Moreover, the agent learned about the pending litigation from his sellers but misunderstood the ramifications of not disclosing it to those interested in purchasing the property.

Result:
The property went under contract to some unknowing buyers who ultimately decided to cancel the Purchase Agreement just prior to the close of escrow upon discovering the existence of the lis pendens. They subsequently sued the agent, his broker, and his sellers alleging that they misrepresented the property’s legal status and demanded the return of their deposit money, as well as moving & storage expenses, home inspection costs, bank fees, and the lost opportunity of a favorable interest rate, among other damages. The case was settled quickly since it was clear that the court would likely determine that the property’s legal status was material information that the buyers should have been made aware of.

Prevention:
In this situation, the agent should have followed pre-established office procedures and asked for assistance from his broker to learn what the impact of existing litigation would have on the sale of the property.  And regardless of the state’s written disclosure requirements, the agent should have had the sellers provide a document to any potential buyers informing them of the legal dispute with the neighbors. Also, the broker may have prevented the agent and business from being sued if he closely supervised the agent throughout the transactional process.

Do you have a similar story involving disclosure 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.

REALTORS beware: Mortgage Fraud is back with a vengeance. The Wall Street Journal explains in its article, “Mortgage Fraud Is Rising, With a Twist,” that criminals are finding loopholes in the newly updated system.

It may be more difficult to commit mortgage fraud these days, but that isn’t stopping some scheming scammers. Be careful to keep an eye out and not fall for the new wave of mortgage crime.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving negligence 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 a forgotten detail.

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 error 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 simple carelessness 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.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving disclosure 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 failure to disclose.

A Real Estate agent, serving as property manager of a condominium building, was asked by the owner to sell it because he was approaching retirement and wanted to dispose of his real estate holdings and move to a warmer climate. Several months later, an offer was submitted through another agent that was accepted and then formalized in a Purchase and Sale Agreement.

Problem
The condominium grounds had a shared driveway with the adjacent property, but this fact was not divulged in the seller’s property condition disclosure or the Multiple Listing Service.

Mistake
The agent agreed to complete and sign the seller’s property condition disclosure and other documents on behalf of the owner.

Result
Following the closing, the buyer received a letter from the adjacent business owner’s attorney seeking a monetary sum for the use of the driveway. The buyer subsequently sued the seller and both real estate agents for failing to advise or otherwise detect that the seller had an established agreement to share the driveway. The agreement contained a provision that it was not transferable in the event the subject property was sold. During the litigation, documentary evidence revealed that the listing agent was aware of the agreement in his role as property manager.

And while the seller admitted that he gave the agent the authority to sign the property disclosure, he testified that he was unaware that the agent failed to disclose the agreement. The case was ultimately settled when the seller and listing agent agreed to pay the buyer the annual fee for use of the driveway for the next seven years.

Prevention
Obtaining the proper signatures or initials on all documents will always help protect you and your clients, while assuring that the transaction will proceed in a straightforward and legally binding fashion. In this case, the agent stepped into the shoes of the seller by executing the documents, resulting in the strong likelihood of a jury finding that the agent was making firsthand representations as to all facets of the property’s condition. Many real estate errors & omissions claims can be avoided by simply exercising ordinary care and judgment. This includes not only good communication skills, but also the implementation of other risk reduction methods into your daily routine that will help you avoid the need to pay costly attorney fees and settlements.

Do you have a similar story involving disclosure 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 discriminatory practices 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 discrimination.

A Real Estate agent was hired by a landlord to lease a two-story townhouse that had one bedroom on the first floor and two bedrooms on the second floor, which was also where the only full bathroom was located. The first applicant to view the property informed the agent that his wife was physically disabled and would require accommodations so that she could access the second floor bathroom. He informed the agent that he was willing to make arrangements to have a chairlift installed and provided the required security deposit together with the fee for a credit check.

Problem
Despite the fact the background check revealed that the applicant had an excellent credit rating, the landlord refused to rent the apartment because he did not want the applicant to install the chairlift or otherwise make physical changes to the property. He instructed the agent to inform the applicants that he decided to lease to someone else, even though
there were no other applicants.

Mistake
When the agent conveyed the intentions of the landlord, it was a clear violation of Title VII of the Civil Rights Act of 1968, as amended by the Fair Housing Act of 1988.

Result
The applicant sued the landlord and the agent alleging that they discriminated against him and his wife when they were denied the opportunity to lease the property because of her physical disability. Their allegations were bolstered by the fact that the rental unit remained vacant for nearly four months after being informed that it was leased to someone else.

Moreover, the eventual tenant testified that she became interested in the property at a date later than the complainants. After incurring thousands of dollars in legal fees, the case settled on behalf of the agent without the agent admitting liability.

Prevention
Prohibited practices that lead to fair housing claims include the refusal to rent, lease or negotiate; offering different terms or affording different treatment; keeping records describing clients/customers; and failing to make reasonable accommodations. Providing equal service to all and not making assumptions of your client’s preferences will reduce the possibility of discrimination claims. And, as evidenced in this case, working with a discriminatory landlord can lead to claims alleging civil rights violations.

Do you have a similar story involving complaints regarding possible discrimination or questions on discrimination 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 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.”

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.

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.