The vast majority of real estate transactions go off without a hitch. But every once in a while, something goes haywire, and a buyer or seller — or both — end up with a beef against one or more agents.
Sometimes, the deal unravels altogether. And it’s happening more frequently than ever.
Nobody keeps track of these things, at least not officially. But Daniel Pruett of Seattle-based Safeco Insurance Co., one of several errors-and-omissions insurers that real estate agents and brokers use to protect themselves in case they drop the ball, estimates that just 1 to 2 percent of all sales result in claims from unhappy customers.
That’s certainly not a lot. But Pruett recently told a group of brokers that the number of claims has “increased greatly in the last five years.” And, he warned, “if you’re in business, you’re going to have claims.”
Worse, claims sometimes lead to lawsuits. And nowadays, says Jay Rothman, partner in the Philadelphia law firm of Marshall, Dennehey, Warner, Coleman & Goggin, “there is no lack of litigation against Realtors.”
Realty professionals can find themselves in hot water for all manner of miscues and failures. The trick for consumers who would rather have smooth sailing than become embroiled in a long, drawn-out, perhaps even expensive dispute is to make sure their agents dot all their I’s and cross all their T’s.
Yes, that’s the agent’s job, not yours. But the idea is to be certain that they do their job. Otherwise, things could get messy.
Take a simple thing like room dimensions, for example. Smart agents will post a disclaimer saying “all measurements are approximate” to protect themselves against the possibility that someone doesn’t know how to read a yardstick. But good agents will take their own measurements.
If room sizes are important to you, you should do the same, especially if your agent hasn’t bothered. And the same goes for the property’s overall square footage. If it’s important that you know exactly how big the place is, don’t take anybody’s word for it. Measure it yourself.
By far the most frequent claims and litigation against agents and brokers involve misrepresentation. Six out of every 10 complaints allege fraud in one form or another, says Safeco’s Pruett, who is also a licensed realty broker: “It’s the big one, and it can come in many ways.”
Robert Bass, a Phoenix attorney who teaches the popular real estate course “30 Ways to Lose Your License,” says plaintiffs’ lawyers “almost always” allege fraud, whether there was fraud or not. And most of the time, he adds, there wasn’t.
The best defense for agents is to explain and document everything to the point of redundancy. And the best defense for buyers and sellers is to take the time to make sure they are totally clear about what’s going on around them.
Attorney Joseph Bottiglieri of Gilberg & Kiernan in Washington, D.C., advises realty pros to “go through each document” with their clients. And the same holds true for buyers and sellers.
“It may take a few more minutes,” the litigator explains, “but in the long run, it will save a lot of headaches.”
Start with the form that discloses for whom the agent actually works.
Nowadays, agents in most jurisdictions must reveal in advance to whom they owe their allegiance. But agency takes many forms, so it is wise to be absolutely positive who, if anyone, represents your interests. Otherwise, you could divulge important information to someone you shouldn’t, thereby compromising your position.
Also make sure that anything the seller or seller’s agent tells you verbally is set forth in writing.
Another big source of complaints against agents results from inaccurate information contained in marketing materials, on the broker’s Web site, in the seller’s property disclosure form or even in the Multiple Listing Service system. You could be led to believe, for example, that the house has city water and sewer when, in fact, it’s on well and septic. Or that the roof is new when it’s really 22 years old.
“Suits are brought frequently when a buyer finds out what they bought is not what they thought they were going to get,” says Rothman, who runs his firm’s professional liability department.
“Corroborate and confirm everything,” he says. “Do whatever it takes. Look at the bills, call the sewer agency. Go the extra mile or risk finding yourself in a lawsuit.”
Because many suits have to do with the condition of the property, Bass also advises sellers to disclose everything they know about the house, and to allow their buyers to have full access to perform any inspection they desire.
“No matter how old the house is, buyers expect it to be perfect,” he explains.
Bass also recommends that buyers have the property examined by a professional home inspector and advises sellers to make sure they do.
“No excuses,” he says. “It doesn’t matter how nice the house looks, or that’s it’s only a few years old. Do everything you can to reduce the risk involved.”
Warranties are another key form of insurance against lawsuits. So much so that Bass says if the buyer doesn’t see the need for one, the seller should offer to pay half the cost or possibly even the total cost to put one in place.
“It’s worth it,” he says, “to make sure that when the water heater implodes six months after closing, the buyer doesn’t come after you.”
Speaking of insurance, it’s also a good idea to be certain the firm you are dealing with has errors-and-omissions coverage.
“It’s Russian roulette not to have errors-and-omissions insurance,” Rothman tells brokers. And that’s sound advice for buyers and sellers, too: You’re playing the same deadly game if you deal with an agent who doesn’t have such protection.
