Top 5 Real Estate Liability and Lawsuit Exposure Client Types

Over time, real estate agents and brokers are being held to ever-higher standards of practice. Your exposure to liability and lawsuits is growing. Can you recognize the types of clients that seem to make the best plaintiffs in suits against real estate professionals? You may still choose to work with a client, but it's wise to know when to be extra careful.

1
Are they bashing other real estate professionals?

Agent testifying in court
Corbis via Getty Images / Getty Images

We all know that there are always bad apples in every profession. It's not inherently bad for someone to mention poor past treatment either. However, consistent complaining about mistakes or poor practice by other real estate agents or professionals could indicate a negative bias that can burn you later.

The social sites have now made this a bit easier to research.  Check out sites like Facebook, Twitter, Google+, Instagram, Pinterest and LinkedIn to see if the potential client is writing negative posts about real estate agents or brokerages.

Zillow.com allows site users to review real estate agents, and there can be some bad ones there.  The point is that there are many sites now where people are talking about our business, and they're sharing what they see among friends and relatives.  So, even if you may not get sued, do you want to take on a client with a history of online bashing of real estate people?

We all want all of the business we can get.  This isn't suggesting researching every prospect you work with.  When you may want to do some of this online research is if the prospect/customer is exhibiting the negative behavior we just mentioned. More

2
Is someone pushing you to act unethically?

Ethics in Real Estate
Ethics in Real Estate. ©canstockphoto

This can be a prospect, client, mortgage broker, another agent, or even an attorney. Even if you resist the specific act, what might they be doing that will get you sued in the transaction?

Even if your required duties are to obey the instructions of your client or customer, no state requires that you break the law to do so.  One area in which this can become a problem after you have a client is with a listing and material fact disclosure.

Suppose your seller lets it slip that they have a problem seepage leak into the basement during the spring season.  Since they're listing in the summer and should sell quickly, they're not mentioning it in their disclosure.  If you don't disclose this material fact you now know about, you're risking exposure later.

No customer or commission is worth risking your license and career over.  Better to fire one customer and keep your business than to make one commission and have to get another job.

3
Are they complaining about being ripped off?

Complaining Customer on Phone
CanstockPhoto

You're already in the transaction, and your client is stating that they feel cheated in some way. This can happen during inspections and repair negotiations. Be very clear as to their options, particularly their option to quit the deal. Too much concentration on" getting the deal to closing" can cause second thoughts and lawsuits later.

Document everything you tell your customer.  It's better to use email when you can, as then you have it in writing.

4
Is someone trying to get around the rules?

Attorney for Your Real Estate Team
Attorney for Your Real Estate Team. iStockPhoto

If your prospect/client is asking questions about getting around mortgage qualification requirements, zoning rules, etc., don't participate in those discussions. You might want to reconsider working with a prospect in this category from an ethics perspective.

This is related a bit to the previous topic item.  However, you may also have a prospect or client asking questions that lead you to believe that they may become a problem.  An example may be a question about whether they have to disclose certain information that would obviously influence buyer decisions about the property.

5
The Digital Paper Trail - A Book About Liability for Real Estate Professionals

Book Digital Paper Trail
Oliver Frascona

Oliver Frascona, Esq. is a real estate attorney and noted lecturer to real estate professionals around the country. He instructs on liability issues in the practice of real estate. See my review on this book here. Buy from Amazon