Becoming a real estate agent is an attractive second job for many people who want the freedom that comes with being self-employment. In residential real estate, the weekends are when most home buyers are available to look at property, so it is easy to work part-time as an agent in the evenings and over weekends. Many people tend to over-idealize realtor’s job as easy-to-do and overpaid. Yet inexperienced real estate agents spend months if not years showing property but selling none. It takes time to understand how real estate market works, how to find prospect buyers and sellers and match them so that the deals goes through and you get your hefty commission.
But even as you think you got a hang of it and sell your first, second, third house – there is a chance you can come back to the deal years after the closing because of a serious error on your part. Who would think that as a real estate agent you are constantly at a risk of being sued by unhappy clients…? With the substantial amount of money at stake in real estate transactions, even a minor complain can result in litigation.
Some types of problems that can cause a lawsuit include a buyer believing you misrepresented the property to them. For instance if a buyer moves into a house, then finds out there is a serious plumbing problem, they can sue you as the agent, for not warning them about this problem. Or, if an agent recommends an appraiser and that appraiser does not uncover a property issue that needs to be repaired, then the buyer could sue the agent for the incompetent referral.
Contract issues can also arise, where a buyer or seller claims that you explained something in the contract in such a way as to misrepresent their legal rights. For instance if a buyer signs a contract to purchase a house and then fails to get the inspection by the date in the contract, then the buyer must buy the house as is, instead of asking for repairs before the closing.
As soon as you become an agent, it is important to check into obtaining errors and omissions insurance. This insurance is offered to real estate agents and brokers to protect them against lawsuits and to pay for associated legal expenses in case of litigation. Even in situations where there is absolutely no basis for the claim, an agent must still defend himself if a lawsuit is levied against them. For this reason, E&O insurance makes sense for any agent or broker involved in real estate. There’s always big risk and competition where big money is. No wonder many people try themselves in real estate business at some point of their lives thinking they have little to lose. But only few remain in it for years and really succeed.
Guest Post by Katya