6.  In California, you are required to make a reasonable, competent, and diligent visual inspection of accessible areas of the property and disclose to prospective buyers all facts materially affecting the value and desirability of the property [… when the licensee has reason to believe such facts are not known to, nor readily observable by a prospective purchaser]. In the Transfer Disclosure Statement (TDS), do not volunteer conclusions as to the cause of anything you disclose; do not diagnose or characterize, only cite factual observations.

7.  Stay well informed. Employ determinative risk management and loss prevention tools from counsel experienced in real estate brokerage and sales law. Attend board/association seminars, and read trade publications (e.g., C.A.R.’s Legal Briefs and Q&As, the DRE Bulletin, etc.).

8.  Do not jump the gun. Avoid situations that could lead to two contracts. Exercise the utmost care with multiple offers, backup offers, and contingencies.

9.  FSBOs raise red flags. Is the seller doing something other than simply saving a commission? Have you unwittingly become the seller’s agent?

http://realestateeo.com/extras/lisa-riggins-disclaimer.html

Do not be greedy. Your fiduciary duty comes before closing the deal. The broker owes his principal the same obligations of diligent and faithful service that a trustee owes to the beneficiary of a trust. Specific fiduciary duties include: account for funds, undivided loyalty, good faith, fair dealing, full disclosure, the duty to follow instructions, and the duty to explain and counsel. Note: Once the fiduciary relationship is established and a breach by the fiduciary is alleged, the burden shifts to the defendant broker to prove that the fiduciary duties were not violated.

http://realestateeo.com/extras/lisa-riggins-disclaimer.html

On a football team every player understands their role. If there is confusion, there is loss of opportunity. The same goes for sales, says Manny Schatz, principal of Professional Builders Services.

Schatz and sales manager Cyd Vacio co-presented at the International Builders’ Show in Orlando Wednesday, describing the role real estate practitioners play in serving buyers while divulging essential tips on how to succeed in new homes sales.

Here are their 10 rules to follow:

http://www.realtor.org/RMODaily.nsf/pages/News2011011302?OpenDocument

4.  Recommend expert inspections from reputable and qualified specialists. Recommend a qualified home inspection. Advise that the inspection company or other consultant have E&O insurance. Provide choices for the client. Counsel clients before the inspection. A home inspection is none of the following: appraisal, pest control certification, certification of any kind, FHA/VA inspection or a warranty. A home inspection is a resource for clients to make decisions of two kinds: immediate and during the course of ownership regarding maintenance. Urge the buyers to go on the inspection with the inspector. If the buyers waive inspections, get your recommendation and their waiver in writing.

http://realestateeo.com/extras/lisa-riggins-disclaimer.html

3.  Do not speak carelessly. As a professional, a real estate licensee must exercise a higher degree of skill and diligence than a non-professional. Negligent misrepresentation is a major cause of lawsuits. Specifically, the broker is charged with more than a layman’s knowledge of the real estate business.
http://realestateeo.com/extras/lisa-riggins-disclaimer.html

2. Learn to be comfortable with your uncertainty. Know what hat you are wearing. If you do not know something, say so, and then get the answer from a qualified authority (from your principal).

http://realestateeo.com/extras/lisa-riggins-disclaimer.html

1.  Why is it so important to document your files, keep notes, and maintain records? When you are sued by your clients possibly years after the transaction and they have selective memory—this way you have documentation on the advice and counsel you gave them (admissible evidence). It also helps you remember what you did and what you said. Pride of authorship (specificity) is the key. Use confirming letters, “chron logs,” emails, mobile phone logs, etc. Get key points in writing and do so before escrow closes. Treat your files as if you will get sued. Recognize that the statute of limitations for fraud (in California) is three years and four years for breach of fiduciary duty; both from the date of discovery.

http://realestateeo.com/extras/lisa-riggins-disclaimer.html

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 following standard office procedures.

A Real Estate agent listed an owner-occupied, two-family residential property with the sellers residing on the main floor and tenants residing in a ground-floor living unit. The residence was sold rather quickly due to its appeal to investors seeking a steady flow of revenue from the long-time tenants, who expressed a desire to remain there.

Problem:
On numerous occasions over two decades, the City notified the sellers that the property did not meet the zoning requirements because the ground-floor unit had been constructed without a permit and was in violation of City Ordinances and Federal Flood Insurance regulations.

Mistake:
When the agent entered into the Listing Agreement with the sellers, they provided him with copies of documents relating to the property, including the most recent non-conforming notice from the City, which also stated that the bathroom and kitchen on the ground floor had to be removed, along with the tenants. However, the agent did not take the time to review the material and simply placed it in his transactional file.

Result:
Soon after the close of escrow, the buyers applied for a permit to complete renovations and learned from the City Zoning and Planning Office that the property was not in compliance. The buyers then sued the sellers and the real estate agent alleging breach of contract, negligent misrepresentation, fraud, and unfair and deceptive trade practices.

They sought damages for lost income, the removal of the kitchen and bathroom, and diminution of value relating to the amount paid above the true market value and the deficient square footage. During the early stages of litigation, a copy of the City’s non-conforming notice was discovered in the agent’s transactional file. The case was settled shortly thereafter.

Prevention:
The agent was one of the leading producers in the marketplace and had successfully closed numerous transactions over his 25-year career. But in this case, the agent’s success led to complacency, resulting in his failure to follow his real estate office’s pre-established procedure of reviewing all documents prior to marketing and advertising property to the public. A simple review would have alerted him to the potential disclosure issues and that his clients were not fully forthcoming about the dwelling’s status. The real estate broker also learned a valuable lesson to make sure that he, too, should follow his own procedures of reviewing the work product of his agents so that situations like this can be avoided.

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.