Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving breach of Purchase Agreement 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 simple matter of lack of communication.

A homeowner placed a house on the market through an agent affiliated with a local broker. At the time of the listing, the house was occupied by the seller’s grown children. A buyer, represented by an agent with the same broker, made an offer on the house, which the seller accepted. The buyer made an earnest money deposit of $2,500 held by the seller’s agent. The Purchase Agreement stated that the seller was not required to make any repair under $300.

Problem
The transaction began to break down over the home inspection process. The buyer wanted repairs on a number of items he claimed were damaged by the seller’s children. The seller had relied on the repair clause in the Purchase Agreement that relieves him of responsibility for repairs under $300. Nevertheless, the seller offered to complete some of the repairs under $300. This led the buyer to request even more, resulting in the exchange of 17 conversations over the repairs. As a result, the buyer refused to attend the closing.

Mistake
Both agents took a passive approach as the dispute escalated. The listing agent failed to adequately inform the seller of his rights and obligations under the Purchase Agreement. The buyer’s agent made no effort to rein in the expectations and demands of his client until it was too late.

Result
The buyer’s failure to appear at the closing caused the seller to take legal action, suing him for breaching the terms of the Purchase Agreement and refusing to close on the home. The seller also sued his agent for not adequately representing him, failing to enforce the terms of the Purchase Agreement, failing to inform the buyer of his limited liability for repairs under the Agreement, and for allowing negotiations for repairs to continue. The buyer demanded compensatory damages and the earnest money being held by his agent. Ultimately, the earnest money was turned over to the seller and an additional modest sum was paid by the buyer and broker to settle the case.

Prevention
Both agents should have been more involved throughout the transaction and the dispute over repairs. Being aware of discrepancies allows you to stay on top of situations, which could potentially spiral out of control. Yielding responsibility for resolution of disputes leaves an open invitation for problems to arise. Remember your representation responsibilities and keep your client informed of their rights and obligations throughout the selling/buying process. Temper expectations that don’t conform with agreements or common sense. Your prompt and intelligent response to issues like this could prevent considerable loss.

Do you have a similar story involving a breach in a Purchase Agreement 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 transfer of responsibility and lack of 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 giving incorrect property information.

A Real Estate agent listed a high-end residential property for sale. The property was constructed prior to 1979, and because of its age, it was presumed to contain lead-based paint. The property eventually went under contract with the seller, who was an attorney, advising the agent that he would handle the negotiations directly with the buyers and would take care of the lead paint disclosure responsibilities.

Problem
The seller met with the buyers, who were also represented by the agent, and entered into the Purchase Agreement without the agent knowing its details until after execution. It was then brought to his attention that during the course of finalizing the Purchase Agreement, the seller never provided the buyers with the legally required lead paint disclosure.

Mistake
Unfortunately, the agent relied on the seller of the property to negotiate the terms of the contract and to produce the lead paint disclosure instead of handling the details himself. After the buyers signed the Purchase Agreement, they realized that they would have to incur thousands of dollars for lead abatement.

Result
The buyers, who were expecting their first child and wanted the home free of lead-based paint, attempted to terminate the contract, but ultimately purchased the property at a significantly reduced price. The seller, being a lawyer, knew that it was truly the agent’s responsibility to assure proper disclosure and then filed suit against him and the broker alleging that they violated both disclosure requirements and the state consumer protection statute. The state’s consumer protection statute called for an award of treble damages in the event the jury determined a violation existed.

The matter was resolved following a failed summary judgment motion (which would have dismissed the broker and agent from the litigation). The seller’s attorney argued that the agent misunderstood the instructions by the seller and that there was no evidentiary documentation from the agent on a transfer of responsibility.

Prevention
The agent would have avoided litigation if he had not allowed his client to assume his responsibilities during the course
of the transaction.

Do you have a similar story involving transfer of responsibility and documentation 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 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 giving incorrect property information.

A Real Estate agent listed a residential property for sale. The seller correctly completed a property disclosure form indicating the home was experiencing a termite infestation problem. The problem was detected when a previous potential buyer had a pest inspection performed. The findings resulted in a failed transaction, with both the seller and the real estate agent having received a copy of the report. Another buyer came along and eventually purchased the property knowing it had a termite problem.

Problem
Even though the agent provided the seller’s property disclosure form and verbally advised the buyer’s agent that the property had a termite infestation problem, the buyer alleged that the agents failed to disclose it.

Mistake
The listing agent neglected to provide the buyer with a copy of the termite inspection report, which detailed all the locations in the home where pest infestation existed.

Result
The buyer sued the seller, the listing agent, and the buyer’s agent alleging that by not providing the inspection report they failed to disclose the “true extent” of the pest infestation. It was also alleged that the buyer’s agent recommended to the buyer that he waive the inspection contingency in the Purchase Agreement. A $20,000 arbitration award was granted to the buyer after the arbitration panel determined that the inspection report contained information detailing a far greater problem than what was disclosed in the seller’s property disclosure or by the agents’ verbal representations.
The legal expenses to defend the listing agent alone amounted to $12,500.

Prevention
The litigation may have been prevented if the termite infestation report was provided to the buyer. Although this would not necessarily guarantee that the buyer would not have brought suit under the same pretext, it certainly would have bolstered efforts to have the court grant the defendants’ joint motion to have the case dismissed.

Do you have a similar story involving disclosure (or lack thereof) 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 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 giving incorrect property information.

A Real Estate agent listed a cottage for sale that was located on a lake inlet. The cottage, situated on an oddly shaped lot, was originally built so that it faced the water but also had views of an adjacent, partially wooded lot. Because of the shape of the lot, the agent urged the sellers to have the lot surveyed and staked by a qualified professional.

Problem
Although the property was surveyed and staked properly, the agent incorrectly interpreted the positioning of the stakes. The agent assumed that the stake in front of the cottage facing the lake represented the boundary between the lots. However, the stake actually represented the opposite boundary of the adjacent lot. The stake representing the boundary between the lots was situated to the right of where they were standing and was not visible because of overgrowth.

Mistake
In addition to misinterpreting the positioning of the pins, the agent neglected to provide the survey results to the buyer for review.

Result
After the closing, the buyers removed the trees located in front of the cottage in order to improve their view of the lake and to install a dock for their boat. Because the agent presented the incorrect property line to the buyers, the buyers stripped the adjacent lot of most of its trees and vegetation during their renovation. The adjacent property owners, who had plans to construct a year-round retirement home on their property, sued the buyers, who in turn brought the agent and her managing broker into the litigation alleging negligence and negligent supervision.

Prevention
Due to the agent’s incorrect assumptions, a rather significant settlement was paid to both the buyers and the neighboring property owners. Had the agent provided the survey results to the buyers, the litigation may have been prevented.

Do you have a similar story involving a charge of 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 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 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.

More and more, REALTORS are finding themselves searching for green builders or ways to make an existing property appealing to the growing population of eco-conscious home buyers. Do you know the ins and outs of environmentally friendly homes? Here is a good place for real estate professionals to start.

A resource on green building certification and education, as well as a place to ask questions to environmentally conscious real estate professionals, the U.S. Building Council’s Green Home Guide can help you and your real estate connections understand the basics of building green. This site helps home owners and sellers do everything from choosing earth-friendly paint and countertops to designing a water-saving bathroom and installing energy-efficient insulation.

Brush up on your knowledge of all things green, especially in your day-to-day real estate practice—you will find more and more buyers use this as a qualifier in their house-hunting process!