Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving REALTOR^® 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 not disclosing information about parties involved in a real estate transaction.

A Real Estate agent had an exclusive listing agreement with the builder of a new, 10-lot residential subdivision. The agent was quickly able to locate three individual buyers who entered into purchase & sale agreements and tendered earnest money deposits to the builder. Shortly thereafter, construction was underway and the respective lending institutions began to release money from the buyers’ construction loans.

Problem:
Approximately halfway through the construction process, the builder verbally notified the real estate agent and contract buyers that he was experiencing financial difficulties in a separate development project due to slow sales and the inability to create cash flow.

Mistake:
Despite the contractor’s financial problems, the agent continued to market and sell the remaining lots, accepting additional earnest money and turning the funds over to the builder. The agent decided not to advise the new contract buyers of the builder’s financial problems, assuming he would be able to overcome these problems because he was a “good builder”.

Result:
The builder soon abandoned the projects that were underway and filed for bankruptcy protection. He left three contract buyers with half-completed houses and seven more with lost deposits ranging from a few thousand dollars to six figures. The buyers then sued the real estate agent alleging that he failed to disclose the builder’s true financial ability and status. The claims ultimately settled against the real estate agent, but without immediate contribution from
the builder.

Prevention:
An agent should never make assumptions about any seller’s or buyer’s financial capabilities and should certainly disclose something material in nature such as a builder’s impaired financial ability. Clearly, the agent should not have continued to accept earnest money after having learned about the builder’s financial struggles. Being a “good builder” doesn’t necessarily guarantee good business management skills. For good measure, the agent should also
confirm in writing to the existing contract buyers when a significant development such as this occurs. It should additionally be recommended to these buyers that they seek the advice of legal counsel and other qualified individuals to help them make decisions on how to proceed. Legal and financial advice should never be given by a real estate agent in any situation. Following these practices will not only result in well-informed buyers, but will help avoid
unwanted litigation.

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 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 REALTOR^® 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 not disclosing property conditions.

A Real Estate agent listed a residential property on behalf of a married couple who were supposedly going to relocate to another part of the country. Approximately two months later, another couple submitted an offer through their agent that was accepted and formalized in a Purchase & Sale Agreement.

Problem:
The sellers were in the process of going through a divorce, with the wife having moved out of the property and unaware that her husband was trying to sell it.

Mistake:
The agent allowed the husband to sign the Listing Agreement and the Purchase & Sale Agreement on behalf of his wife, when both of them were the legal owners.

Result:
Following the execution of the Purchase & Sale Agreement, the husband informed his wife that he had sold the house and asked her to attend the closing to sign the necessary documents. The wife refused to do so and notified the real estate agents that the deal was not going to go forward. After the buyers were notified, they sued the sellers for specific performance under the contract. The wife seller then third-partied the listing agent into the litigation alleging that she acted negligently in accepting the forged signatures. The case was ultimately settled when the husband seller and the listing agent’s errors & omissions insurance carrier paid a monetary sum to the buyers to walk away from what was otherwise an invalid contract.

Prevention:
Many real estate errors & omissions claims can be avoided by simply exercising ordinary care to your clients. This entails knowing who your clients are and properly communicating to each one of them anything—from the comparative market values to what they should expect during the listing period and after the property goes under contract.

Obviously, getting the proper signatures or initials on all documents will help protect you and your clients, while assuring that the transaction will proceed in a straightforward and legally-binding fashion. Good communication skills and the implementation of other risk reduction methods into your daily routine will help avoid the need to pay costly attorney fees and settlements.

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.

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

A real estate agent listed a residential property on behalf of sellers who completed a Seller’s Property Disclosure Statement, which revealed problems with leaky windows in the attached garage.

Problem
The property went under contract to prospective buyers, who hired a home inspector. The inspector discovered that the windows throughout the home were either defective or had been installed improperly. The findings resulted in a failed transaction, with both the sellers and the real estate agent having received a copy of the report.

Mistake
Another buyer came along and eventually purchased the property and was provided a copy of the Seller’s Property Disclosure Statement. However, the statement was not amended to reflect the results of the recent home inspection and the buyer was not provided a copy of the inspector’s report. The real estate agent claimed that she verbally advised the buyer of the content of the report.

Result
Following the close of escrow, the buyer soon discovered that most of the windows were experiencing problems. He then sued the sellers and the real estate agent alleging that by not providing the inspection report and not amending the Seller’s Property Disclosure Statement, they failed to fully disclose the defects. It was further alleged that the real estate agent recommended to the buyer that he waive the inspection contingency in the Purchase Agreement. The case ultimately settled for $12,000.

Prevention
The litigation may have been prevented if an amended Seller’s Property Disclosure Statement and the home inspection report were provided to the buyer. Although this would not necessarily guarantee that the buyer would not have brought suit under the same pretext, it would have helped the defendants position their respective cases to request that the court dismiss the litigation.

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 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.

Pearl Companies—which includes Pearl Insurance, Pearl Technology, Pearl Benefits, Pearl Automotive, and Pearl Carroll—proudly surpassed their 2010 goal of beating their best fundraising year ever for this year’s United Way Spirit Week campaign. In 2008, Pearl raised its previously unbeaten record of more than $16,000. This year, Pearl associates contributed to this week-long fundraising campaign by raising more than $23,500 for their United Way campaign! We’re hoping to beat our best year once again in 2011!

With what Pearl’s employees were able to offer them, the United Way can help people—regardless of income, gender, color, or creed—with assistance they truly need such as counseling, disaster services, emergency shelter and services, respite care, parenting skills, recreation, outreach services, legal advocacy, and educational programming. They can offer self-reliance programs including employment services, counseling, life skills, food pantries, home delivered meals, emergency assistance, special transportation, and transitional housing. And they can fund health programs including health and safety services, community clinics, exercise/therapy, emergency response, home health care, substance abuse prevention and treatment, dental services, visual services, Alzheimer’s and Arthritis education and support, and more.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving unauthorized entry 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 repairs made before the close of escrow.

A real estate agent listed a residential property while, at the same time, working with prospective buyers who were looking for a home that could be renovated and sold later at a profit. The agent subsequently showed the property to his buyers who saw the potential in a positive resale if the floor plan could be opened up by removing portions of walls between the kitchen, dining room and living room. Eventually, the parties entered into a purchase and sale agreement.

Problem:
Due to job relocation, the seller vacated the property prior to the close of escrow and, at the request of the agent, allowed the buyers access to the property in order to take measurements for the renovation project.

Mistake:
The agent thought that it would be easier if he provided the lockbox combination to the buyers since he was confident that the buyers would meet the financial contingencies to acquire the property.

Result:
The buyers shared the agent’s confidence that the deal would go forward. They decided to get a head start on the renovation project and proceeded to remove the walls and electrical wires. Shortly thereafter, they received notification from the lending institution that their mortgage application had been denied. After applying to several other lenders with the same result, they abandoned the project and notified the agent that they were terminating the contract. The seller then sued the agent alleging that he negligently allowed the buyers unsupervised access. The seller also sued the buyers alleging unlawful entry and property damage. Four months into litigation, the parties resolved the dispute for $17,500.

Prevention:
Obviously, an agent should never provide keys or access codes to any buyer, contractor, or other unauthorized persons prior to the close of escrow. In the event a contractor must enter a property, the agent should be present only if the seller is unable to attend. In this situation, it is good practice to recommend to sellers that a relative or friend meet with the contractors in order to avoid any liability claims should something go wrong at the property. Also, a contractor will sue a real estate agent if the seller fails to pay for his services when the agent makes repair arrangements on behalf of the seller. Lastly, written authorization from the seller with “release of liability” language will go a long way in the defense of any unwarranted lawsuit.

Do you have a similar story involving unauthorized entry to 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 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.

Make sure you can insure your home. Past claims can create difficulties for both buyers and sellers.

It pays to educate yourself about home insurance when you’re seeking affordable coverage. Here are some ways you can help yourself (from Insure.com):
• Find out the rules regarding home insurance renewals in your state. Some states exercise control over when an insurer can refuse to renew your policy. In Texas, for example, an insurer can’t refuse to renew your home insurance policy unless you’ve made three non-weather related claims within the past three years.
• Consider paying for small losses out of your own pocket. Insurers take notice of customers who submit too many small claims. If someone breaks into your house and steals your new TV, it might be better to go out and buy a new one at your own expense, particularly if you’ve had a claim or two within the past three years.
• Think twice before you call your agent or insurance company. If you are considering filing a claim, but aren’t sure, wait to make that call. The minute your insurer’s customer service representative logs your call, the insurer has opened up a file on that issue that will be tracked through its computer system.
• Shop around for coverage. If your insurer denies you a policy based on previous claims or the rates are simply unaffordable, don’t get discouraged. Obtain insurance quotes from at least three other insurers so you can compare premiums and coverage options. If you cannot get a home insurance policy, see if your state has a Fair Access to Insurance Requirements (FAIR) Plan. FAIR plans were created in the late 1960s to make property insurance more readily available to people who can’t obtain it from private insurers because their property is considered “high risk.” Learn more about FAIR plans from Insure.com.
• Raise your deductible and consolidate insurers. Consider raising your deductible in order to lower your premiums. Also, most companies will give you a discount if you insure both your car and home with them.
• Check your credit record. In addition to your past claims history, some states allow insurers to use your credit history to help them decide whether to issue you a policy.

There are two major property claim databases that contain loss history reports, C.L.U.E. (Comprehensive Loss Underwriting Exchange) and A-PLUS (Automated Property Loss Underwriting System). The C.L.U.E. database, owned by LexisNexis, allows insurance companies to access information on claims that have been filed within the last five years.

More home buyers—concerned about possible previous insurance losses experienced at a property they are considering—are requiring home sellers to provide a C.L.U.E. report as a contingency to a purchase offer. A C.L.U.E. Home Seller’s Disclosure Report is an independent source of information about insurance losses at an address within the past five years. If the home has not experienced a loss within the past 5 years, the report can provide comfort to a potential buyer.

The C.L.U.E. Home Seller’s Disclosure Report does not display information that a home seller may wish to keep private, such as Name, Social Security Number, and Date of Birth. It is available immediately via online delivery for the seller’s primary address or by mail for other properties the seller may own.

Unfortunately, a buyer can’t order a C.L.U.E. report if they are not yet the homeowner. Prospective buyers aren’t allowed to request a C.L.U.E. report for a home they want to purchase, but as an agent, you may want to advise your clients to request one as a condition of the sale.

The C.L.U.E. database tracks numerous “causes of loss” showing why a claim was submitted to a property/casualty insurer for payment, including:

• Contamination
• Damage to property of others
• Dog bite
• Earthquake
• Fire
• Flood
• Freezing water
• Hail
• Liability
• Lightning
• Medical payment
• Slip/fall
• Smoke
• Theft/burglary
• Vandalism
• Water damage
• Wind
• Workers compensation

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving 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 an optimistic promise.

A real estate agent marketed a commercial piece of property that included street level retail and several residential units on the upper two floors. The owner of the property operated a failing video rental business and was eager to sell the entire building before foreclosure action was undertaken by the mortgage holder. On the other hand, the residential units were producing a steady stream of revenue since they were occupied by longtime occupants who were making timely rental payments.

Problem
Optimistic about the location of the property, the real estate agent erroneously believed that a retail operation could be successful and that the residential lease amounts could be increased since the tenants were comfortable living there and were unlikely willing to move.

Mistake
While working with a prospective buyer, he guaranteed that her greeting card business would generate a positive cash flow and that the tenants would be able to absorb an increase in their monthly rent.

Result
Given these assurances, the buyer decided to acquire the property and notified the tenants of their respective rent increases shortly after the close of escrow. Within the first few months, four of the six tenants informed her that they were unable to pay the increase and decided to move. The buyer then experienced difficulty in finding new tenants willing to pay what she needed in order to make the residential component successful. Compounding the problem, the greeting card business was not seeing the desired foot traffic and corresponding revenue. Over the ensuing 18 months, the status of the business remained unchanged so the buyer sued the real estate agent alleging that he intentionally misrepresented the property’s profit potential. Damages sought included both lost business profits and lost rental income. The parties ultimately resolved the litigation for $75,000 in lieu of enduring a two-week trial.

Prevention
An agent should never make promises or guarantees about the revenue potential or future value of any property marketed for sale. Acting outside the scope of expertise is a dangerous proposition and should be left to a buyer as part of their due diligence obligation. Always recommend in writing that buyers seek counsel of qualified accounting and financial planning experts to help them make decisions on whether to acquire revenue-producing property. Following this practice will not only result in satisfied buyers, but will help avoid unwanted litigation. It should be noted that most, if not all real estate errors & omissions policies do not provide coverage for claims arising out of promises, warranties, or guarantees made as to the future income/value of property or the performance of a business.

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.

Are you on the fence regarding whether or not you need Errors and Omissions Insurance to protect you in your daily real estate business practices? Sometimes, no matter how careful you are to manage your risk in your day-to-day operations, you still get sued because of a forgotten detail or a minor misstep. Here are the Top 5 Reasons you need real estate E&O coverage!

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

A real estate agent was workinAgentg with a prospective first-time buyer who was searching for a residential property that did not require significant improvements because she did not have the financial resources to invest in structural remediation. The agent showed his buyer several properties before she decided to submit an offer on a home that she believed only needed cosmetic improvements.

Problem
The home had a history of water intrusion problems resulting in extensive wood rot and insect infestation.

Mistake
While walking through the property, both the real estate agent and the buyer noticed water stains on the ceilings and walls in the second floor bedrooms. They were advised by the sellers that the stains were a result of “old damage” and that a pre-existing roof problem had been repaired. The agent, unfortunately, took the word of the sellers and failed to recommend that his buyer obtain a home inspection for further investigation.

Result
After taking possession, the buyer discovered during a rainstorm that water was penetrating the roof and seeping through the second floor ceiling and walls. She then hired a contractor who determined that the wood rot and infestation was so extensive that the ceiling joists, wall studs, and sheetrock had to be replaced. The buyer subsequently sued the sellers alleging intentional misrepresentation and the agent alleging misrepresentation and failure to recommend a home inspector. The parties ultimately resolved the litigation for $42,500.

Prevention
Always conduct a careful visual inspection of any property whether you’re serving as a listing agent or buyer’s agent and be sure to look for clues or “red flags” that may indicate latent defects which may involve more extensive problems. Never act outside the area of your expertise. You should recognize when to ask for help from another professional or recommend the use of services from other professionals such as home inspectors and pest inspectors. It is essential that buyers realize their right to request any type of property inspection—and that inspection contracts and reports may contain disclaimers. If the buyer decides not to do so, have them acknowledge this choice in writing and keep all documents for your records.

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.