Guy Chipman from the Texas Association of REALTORS^® wrote a well-received article entitled “Errors, Omissions, and Lawsuits, Oh My!” on the key lessons he learned while looking for an E&O provider. We will be posting one tip per week from Chipman’s article, with Pearl’s comments in italics. See what Pearl E&O coverage offers.

2. Make sure all your services are covered. If the insurer can’t cover all of the services your company offers—residential, commercial, property management—it’s probably not the right company to meet your E&O needs.

Pearl’s policy covers property managers, appraisers, auctioneers, assistants to agents and business brokers. Beyond covering all aspects of real estate practice, we offers flexibility to ensure that each individual realtor’s individual needs are met. Pearl offers per claim coverage and aggregate limits ranging from $250,000 to $5,000,000, and deductibles from $1,000 to $25,000, or higher. Pearl gives all of our customers’ individualized attention in order to customize a plan that is ideal for their needs and business focus.

Have you ever struggled with an E&O agent unable to meet your needs? How do you pick the right E&O Provider? Let us know by posting a comment below!

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving a delayed response to a real estate errors and omissions lawsuit 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 negligence.

Following the close of escrow on a residential property, a Real Estate broker and his agent were sued by the buyers for allegedly failing to provide the required Seller’s Property Disclosure Statement. The broker and his agent were adamant that they were in compliance and would have been able to demonstrate from documentary evidence that it was provided to the buyers’ agent. The evidence included a facsimile transmission of a cover letter addressing the “attached” property disclosure, along with electronic mail exchanges with the buyers’ agent discussing the property’s condition.

Problem:
Believing that the lawsuit was frivolous, the broker and agent simply ignored it. They also ignored the ensuing Motion for Default brought by the buyers’ attorney for failing to file an answer to the complaint.

Mistake:
By ignoring both the lawsuit and default motion, the court entered a five-figure judgment against the Real Estate brokerage. And to make matters worse, the Default Judgment was not tendered to the Real Estate Errors & Omissions insurance carrier until one month later.

Result:
Despite an all-out effort on the part of the defense attorney assigned by the Errors & Omissions insurance carrier, the Default Judgment could not be overturned due to the delayed responses on the part of the brokerage. Furthermore, the insurance carrier was under no obligation to pay the judgment since the Real Estate brokerage failed to comply with the terms and conditions of its Errors & Omissions policy by not providing timely notice of the claim.

Prevention:
Many jurisdictions have very strict deadlines for filing court documents. In this case it’s quite clear that the Real Estate brokerage could have avoided its problems if the lawsuit was reported immediately to the Errors & Omissions insurance carrier. And given the favorable evidence in the transaction file, the claim may have been voluntarily dismissed once the buyers’ attorney was presented the irrefutable evidence. In order to preserve this evidence, it is very important not to destroy your file following a closing so that an effective defense can be asserted on your behalf. The transaction file should include the following:

• the date and time of all meetings or phone conversations and a list of all participants

• e-mails and faxes

• verification that what you say and write is correct—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 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.

You’re working harder than ever—shouldn’t your E&O provider do the same?

Pearl Insurance knows you’ve put in the extra effort to remain viable in this industry, and so have we. For the last three decades, we’ve continually innovated Pearl’s E&O coverage to keep up with the ever-changing demands of the real estate market. And we’ve once again made it new and improved!

We’re so excited to announce major enhancements to our Real Estate Errors & Omissions policy, which Pearl insureds will enjoy right away:

• Environmental Failure to Advise up to full policy limits
• Public Relations Advisory Services
• Lockbox coverage to full policy limits
• Consent to Settle
• Mold Endorsement with increased limits—NEW!
• Subpoena Assistance—NEW!
• Free 3-year Extended Reporting Period—NEW!
• Loss Mitigation Credit—NEW!
• Network and Privacy coverage with a $25,000 sublimit—NEW!
• Deductible Reduction for Early Claims Resolution—IMPROVED! Applies to both defense and damages!
• Open House Property Damage coverage—IMPROVED! Up to FULL policy limits!
• Agent-Owned Property Coverage—IMPROVED! No waiting period applies!
• And many more benefits and NEW improvements!

Pearl E&O Insurance: It’s already robust!

The key to developing a good relationship in any business is to listen to what your customer says and pay attention to their needs. Not to mention, imagine the number of Real Estate E&O claims that in the long run had something to do with poor communication! In the March/April 2011 issue of Selling Power, John H. Melchinger offers 9 tips to become a better listener. Here is an excerpt:

1. Put aside all personal issues. Be attentive and concentrate on hearing what the speaker has to say.
2. Comment on what you hear, and individualize your comments: “Cheryl, that’s obviously very important to you.” If you train yourself to comment meaningfully, the speaker will know you are listening and may offer further information.
3. Show empathy. If you respond to human issues, people will respond to you.
4. Don’t ignore opportunities for humor. When it arises naturally our of a conversation, humor enhances what may otherwise be an overly somber situation. Avoid sarcasm, however, which is rarely humorous.
5. Be aware of nonverbal communication: silence, facial expressions, tone of voice, body gestures. These can be telling symptoms, but don’t allow these messages to be the basis for speedy conclusions.
6. Know the value of silence. A brief period of silence will generally cause the speaker to produce more in-depth responses and allow both of you to reflect on what’s been said, ask additional questions, seek further clarification, or provide more information.
7. Ask questions to clarify information. The best indicators that you hear and understand are your questions and how you ask them.
8. Be sure you are not making inaccurate assumptions. When the speaker leaves a point unfinished, finish it yourself and ask for agreement, or simply ask the speaker to finish it.
9. Be careful. Most people have an almost immediate grasp of the obvious, but few of us can grasp immediately what a speaker means to convey.

All too often, real estate prospects look to foreclosures as an easy way to buy property on the cheap. Although there are likely decent foreclosure deals available, purchasing a foreclosed home can come with a fair amount of headaches. Keep these in mind if your client decides to go ahead with acquiring a foreclosure.

1) Get it inspected by a professional.

Stipulate to your client that they need to get the property checked out by a certified professional home inspector, and don’t bid on houses that aren’t available for inspection. Don’t let your client base their buying decision on appearances alone; the home could have mold, pests damaging its structural integrity, an insulation problem, shoddy construction, asbestos … you name it. Your client needs to know how much work (and money) they will need to put into the home up front.

2) Consider factors that may have led to the foreclosure.

Is crime on the rise in the neighborhood? Are the schools not making the grade? Is the view not so pleasant? How long has the home been empty? Are there plenty of other foreclosures in the area? Foreclosures aren’t always due to a lack of money or budgeting skills; maybe the previous homeowner bought the house without realizing there was a particular blight on the property.

3) Be cautious if the house is currently occupied.

Keep in mind that some people involved in the foreclosure may be living on the property and may be difficult when it comes time to leave. Even with title in hand, your client could have a hard time evicting the unwanted tenants. And once they do leave, they may have retaliated by destroying the property. (This may not be an issue in certain areas.)

4) Advise your client against flipping.

Unless your client has an arsenal of cheap contractors and materials at their disposal, there always seems to be pitfalls along the way that end up costing more than the person looking to make a quick bundle bargained for.

5) Recommend to buyers that renovations are within the their budget.

Even for properties needing a seemingly modest amount of renovation, there’s usually more work and money involved than planned. In order to make the most of the foreclosure’s bargain price, the buyer should not go into further debt by taking out loans and losing money on interest. Have a home inspector detail all work needed and make sure the buyer has enough cash to fix it all.

6) Recommend they find a reputable lender.

The wrong lender might not spend as much time on a foreclosure case as on a standard real estate purchase, because they stand to make less money on the former. A good lender will research what your client’s best option is. Tell your client to ask a lot of questions—the lender should explain everything to your client very clearly. You should advise them to meet with a real estate attorney as well.

Pearl Insurance is a nationally known broker, marketer, and administrator that specializes in the design and administration of quality insurance plans for associations, affinity groups, unions, and large firms. In addition to providing real estate professionals with quality products and services for 30 years, their partnership with the XL Insurance companies (through Indian Harbor Insurance Company and Greenwich Insurance Company) solidifies their strength, allowing them to offer association members an A rated (by A.M. Best) E&O program. For more information about Pearl’s sponsored E&O programs, call 800.289.8170.

Information provided within this article is not to be taken as legal advice and is to be used for educational and illustrative purposes only.

Sometimes the past is one of the best learning tools around! Use the following Real-Life Errors & Omissions Claim Situation involving REALTOR^® acting outside of your 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 performing a function that is outside of your realm as a real estate professional.

A Real Estate agent listed an older residential property that needed a roof replacement because water was penetrating the attic and running down the walls. As part of the marketing strategy the sellers agreed with the agent that the best way to sell the home for a better price would be to have a new roof installed. In addition to fixing the water intrusion problem, it was believed that the enhanced curb appeal of the property would likely garner more interest.

Problem:
The contractor that was hired to do the work was not fully paid by the sellers when the work was completed.

Mistake:
After the marketing strategy was agreed to, the agent decided to select and hire the roofing contractor on behalf of  her clients so that they could focus on prepping and painting the water stains on the interior walls of the home. The sellers provided a check to the agent for the down payment required by the roofer, but it was the agent who signed
the contract order.

Result:
When the project was close to completion, a potential buyer tendered an offer on the property that the sellers quickly accepted. However, when the contractor wasn’t paid by the sellers for the balance due, he filed a mechanic’s lien against the sellers and the real estate agent for non-payment. The buyer then sued the sellers for specific performance and
demanded that either they or the agent pay the contractor to lift the lien. Following a two-month delay in the closing, the matter was resolved after the sellers and agent agreed to contribute equal shares to pay the contractor.

Prevention:
An agent should never select and hire any vendor to do work on sellers’ property—and should certainly never sign a work order on their behalf. By doing so, an agent becomes contractually liable to the vendor and may, as in this case, become the object of litigation when a buyer of the property attempts to enforce a Purchase Agreement. It’s also important to remember that most, if not all, real estate errors & omissions policies don’t provide coverage for claims based on or arising out of liability of others assumed under any contract or agreement. Making the simple decision to leave contractor selection and engagement to a homeowner will increase your chances of avoiding litigation from both the contractor and any potential buyer of property.

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.

Do you or your clients want to do some remodeling, but need to make sure the money you spend will pay off in the long run? Here are six ways to ensure a remodeling project is worth your time and effort, courtesy of Josh Garskof of Money Magazine.

According to a study from Remodeling magazine, the average return on value for an upgrade declined from 87% in 2005 to 64% in 2009. But these six new rules will help you maximize your return on your remodeling investment.

Rule No. 1: Repairs get the biggest returns

The smartest money now goes into “undeferring” needed maintenance. That’s because while buyers might appreciate enhancements like Jacuzzis and Sub-Zeros, they won’t tolerate a house with a leaky roof or antiquated plumbing. “If a property is known to have issues, today’s buyers won’t even look at it,” says Austin real estate appraiser Jim Amorin. And trying to keep problems a secret can cost you big-time. If buyers discover them during inspection, it’s now common practice to ask sellers not only to pick up the tab for the repair but also to pay a penalty to compensate the buyer for the inconvenience of having work done. So the $20,000 you saved by putting off a roof repair, say, could turn into a $30,000 credit to the buyers at closing, says Amorin.

Rule No. 2: Remodeling beats adding on

McMansions have gone the way of the SUV—and large additions don’t pay off either. “There’s been a fundamental shift toward quality over quantity,” says Warwick, R.I., real estate agent Ron Phipps. Having a big, formal living room plus an everyday family room is less desirable than having one multi-use common space. So rather than adding on, you’re better off repurposing existing square footage by reconfiguring the floor plan or capturing unused basement or attic space. Want an eat-in kitchen? Knock down the wall between the kitchen and dining room ($2,000 to $8,000, depending on whether it’s load-bearing or contains plumbing). That will instantly create a large eat-in kitchen and give the whole house a more open feel—without a huge investment to make up at resale.

Rule No. 3: Eco-friendly upgrades can save cash

Some green improvements pay you back long before you sell your house. Install energy-efficient features, such as EnergyStar appliances and extra wall insulation, and you’ll see lower energy bills every month. Add in the federal tax credit of up to $1,500 that lasts through 2010, plus many local rebates and tax incentives (see dsireusa.org), and the work may pay for itself in just five years. Green features are also increasingly a selling point, says Phipps. “Most people in the market right now are first-time homebuyers in their thirties, and they’ve been raised to care about carbon footprints and being ecofriendly,” he says. The best way to go green is with a while-you’re-at-it job: When it’s time to replace your furnace, for example, upgrading to super-efficiency might add only $500 (after tax credits), compared with standard new equipment, but it will save you — and your buyers someday — $150 or more in annual heating costs.

Rule No. 4: Tech infrastructure trumps cool gadgets

Home electronics seem like a deal, since prices have fallen about 50% over the past three years and continue to drop, according to Stephen Baker, president of industry analysis at NPD Group, a market research firm. Still, that doesn’t change the fundamental problem with expensive built-in technology: Put in a $10,000-plus dedicated home theater today, and something better will come along tomorrow and make your system look as if it’s from the Mesozoic Era. With buyers seeking any excuse to low-ball their offers, they’re not going to reward you for an out-of-date system. Tech infrastructure is different, however. Anytime you’re opening up walls for a construction project, have cabling and Ethernet ports installed. At about $80 a room, it’s a low-cost way to provide the capability for whatever technologies come along.

Rule No. 5: Let the Joneses be your guide

During the boom, you could be the first on your block to have a luxury kitchen, spa bathroom, or in-ground pool and count on others following suit. And even if the neighbors never took your lead, there was plenty of equity growth to cover your costs. Nowadays that fudge factor is gone. “You really have to keep your house’s amenities in line with the neighborhood now,” says Kermit Baker, director of the remodeling futures program at Harvard University’s Joint Center for Housing Studies. If other houses on the block have real marble countertops, by all means add one to your house, but if everyone still has faux blue-marble Formica from the ’70s, you’re not getting your money back. Also, keep your projects design-neutral so they’ll appeal to the greatest number of people. Choose neutral colors and traditional electrical and plumbing fixtures unless your house has a modern architectural style.

Rule No. 6: The new payback time is five years

As with any volatile investment, the longer your time frame, the lower the risk. Don’t take on a big project if you’re likely to move in less than three to five years. There’s just too much chance that any money you put in—aside from necessary repairs or superficial cosmetic work—could be lost while the housing market continues to meander. But if you plan to stay awhile, don’t delay starting a project. Home improvements are a bargain right now, with contractors bidding 10%, 20%, even 40% lower for the same work than just a year or two ago, says Bernie Markstein, senior economist for the National Association of Home Builders. Grab them while they’re hungry for work and make it clear that you’ll be getting multiple bids so they’ll be motivated to undercut one another’s prices. You’ll fulfill the first rule of investing: Buy low. Then hope that when you’re ready to move, you can sell high.

In light of a recent terrifying REALTOR shooting, we thought it was time to again share some safety advice for you to keep in mind in your daily practice in real estate. Please read and adhere to these 10 Tips to Open House Safety:

1. Upon entering a house for the first time, check all rooms and determine several “escape” routes. Be hyper-vigilant about your surroundings and a way out.

2. Make sure all deadbolt locks are unlocked to facilitate a faster escape. Be certain there are no obstacles in front of exits.

3. Check to see that if you were to escape by the back door, you could escape from the backyard. Frequently, high fences surround yards that have swimming pools or hot tubs. Find the door in the fence, or locate another way out.

4. Leave one of your business cards, with the data and time on the back, in a kitchen cupboard. Note on it if you were the first to arrive or if clients were waiting.

5. When prospects begin to arrive, jot down their car description, license number, and physical description.

6. When showing the house, always walk behind the prospect. Direct them, don’t lead them.

7. Watch what the prospects are doing at all times. Do not become preoccupied with viewing the home, and expect the unexpected.

8. Notify someone in your office, your answering service, or a friend or relative that you will be calling in every hour on the hour, and that if you don’t call, they are to notify the police immediately.

9. Inform a neighbor that you will be showing the house and ask if he would keep an ear open for anything out of the ordinary.

10. Don’t show alone—have someone from your office, a relative, or friend stay with you.

Source: Washington Real Estate Safety Council

REALTOR^® Magazine provides a lot of resources to help real estate professionals be safe in not only their open houses, but throughout their career. Read their 6 Dangers in Real Estate to further protect yourself in common REALTOR situations.