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.