Don’t Make Assumptions!
Have you ever responded to a potential buyer’s question about a property and then thought, “Hmm, maybe I’m not too sure about that”? Unless you know the answer without a shadow of a doubt, it is always best to be safe by recommending an inspection so that you don’t misinform potential buyers. Even if you thought you were answering honestly, you could be sued for being deceitful.
Well Inspection Could Have Prevented Day in Court
A Real Estate agent listed a home for sale that received its water supply from a well. According to the agent, the seller represented that the well produced an adequate water supply for the buyer interested in purchasing this residential property for his family.
Problem
The water supply the well produced was probably sufficient for the needs of the seller, but the buyer’s family was much larger than the seller’s. After taking possession of the property, the buyer quickly discovered that due to the increased consumption from bathing and laundry, the water production from the well could not support the functional needs of the buyer. The water production diminished and it became necessary to have another well drilled.
Mistake
The agent made an assumption of what the buyer’s needs were instead of recommending the buyer have the well independently tested.
Result
The buyer filed suit against both the agent and the seller of the property.
Prevention
Real Estate professionals often represent well water flow to be adequate for a buyer’s needs, especially when the source of the statement comes from the seller. However, it shouldn’t be assumed that the buyer will necessarily agree. A yield of 5 gallons per minute may be acceptable for one person, but not another. In making representations based on assumptions, you may be putting yourself at risk for litigation should your representations be perceived as being untruthful at a later time. If water production tests yield 5 gallons per minute, that should be what is represented.
Recommend the buyer hire an independent source to verify the information. This will go a long way in removing any perception of deceit and also transfer the risk of litigation to another party. Additionally, a well inspection may also lead to the detection of other environmental hazards, such as underground storage tanks. Contaminated water can also involve significant expenditure if clean water has to be delivered to maintain the property’s legal occupancy.
Do you have a similar story involving a time when you should have recommended an inspection rather than answering to the best of your knowledge? 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.
