Top 5 Ways to Get Sued in Real Estate

As I conduct real estate on a daily basis I run into agents doing and saying things that utterly shock me. It would appear that many agents are trying to get sued and lose their license. While my team and I enjoy joking about the silly things we see, I often wonder if these agents understand the severity of what they are saying and doing. On that note, here is my attempt to help real estate professionals avoid getting sued and in turn better represent their clients.

 

1) "completely remodeled home"

How often do you see marketing text that refers to a home as "completely" or "totally" remodeled? All the time! I want to ask these agents, "Totally remodeled, eh? So you can personally attest to every single piece of that home being new? There is not one original 2x4 piece of wood? Not a single trace of the old foundation?" I thought so. It sounds like this home is substantially remodeled. Other great terms are: drastically, excessively, terrifically, and extraordinarily. Do not use words that make guarantees that you cannot back up.

2) "This home will be worth so much money in a few years"

dusty baker depreciation graph sued

For real estate agents that were active during the 2003-2008 run, I'm sure you heard agents in the bull pen saying things like this multiple times a day. Assuring market appreciation is a scary thing because sometimes homes do not appreciate. Sometimes, like in 2008, their values plummet for years. I personally do not want to be standing in front of a judge as my client reads the email I wrote that guarantees appreciation. I also don't want to lead my valued clients astray with lies. Avoid making promises that you cannot control. Instead, try phrases like, "The market has been appreciating at +/- 5% for the last 2 years and I do not see any indications of it stopping. Of course I do not have a crystal ball, but the overall economy seems strong." It gets a similar point across without putting you at risk or giving your clients false security.

3) "We can waive the mandatory city zoning inspection"

In the city of Santa Barbara, there is an ordinance that requires a city inspector to complete a "Zoning Information Report" for every home that transfers title within city limits. I regularly see agents that facilitate waiving this mandatory inspection for their clients. Yes, the penalty for the clients may be a slap on the wrist but you as an agent are liable to lose your real estate license if you are caught facilitating breaking the law. When clients tell me that waiving the Z.I.R. is more convenient for them, I tell them that tax fraud is more convenient as well -- and I will have nothing to do with either action.

4) "You can write this off as a business expense"

We are not legally allowed to give any tax advice. This can be tough because often times we do know an answer to a simple tax question, but remember we are obligated to inform our clients that we are not licensed tax professionals and that they should verify anything we talk about with their CPA.

5) "We are listed at $1,000,000 but my seller will take $950,000"

The California agency disclosure defines our fiduciary duty as treating our sellers with the "utmost care, integrity, honesty and loyalty." Loyalty to our sellers means playing poker intelligently and fighting in negotiations to make every dollar out of the sale as possible. Giving away information about our seller that that hurts in negotiations isn't being careful or loyal, it is simply trying to put together a quick deal for an easy commission. No wonder real estate professionals have such a bad reputation!

 
dusty bake avoid getting sued

Please don't be stupid

Before you say or do something in real estate, imagine it is being read aloud in a court room or in front of your client. Are you still comfortable with your action? If not, find a way to re-word your answer or avoid it altogether. There is no single commission that is worth losing your license over (or much more) and there is no excuse to making an easy commission at your client's expense.

Now go out there and sell real estate -- intelligently!

-Dusty