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.

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 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 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.

Here’s a great article posted by www.realestate.com called “Top 10 Home Buying Mistakes” that you may want to share with your real estate clients. For those who may not understand the process of buying a home or are on the fence about buying real estate “the right way,” these tips serve as useful tips on how to make purchasing a home go as seamlessly as possible.

Read the article and let us know if you agree by posting a comment below!

The new Massachusetts data security law is now in effect, as of March 1. This regulation—201 CMR 17.00—requires businesses to adhere to stricter guidelines to keep the confidential information of Massachusetts residents secure. It’s very important that all real estate professionals take all steps needed to comply with this law immediately. Here’s an explanation (see more by downloading the pdf of the article, “New Massachusetts Data Security Law: Are You in Compliance?” from Pearl Insurance).

Meant to protect Massachusetts’ residents from identity theft, the law now “establishes minimum standards to be met in connection with the safeguarding of personal information.” Now businesses must not only notify consumers of when a possible data theft or misuse has taken place, they must have standards in place to proactively protect their customers’ personal information.

If you don’t know if you’re up to speed on this law, PLEASE download the full Massachusetts Data Security Law article below! This regulation is not just meant for Massachusetts-based organizations, it is in effect for ANY company who does business with a Massachusetts resident.

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.

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!