Most real estate agents were shocked enough when they heard that The National Association of Realtors and two brokerage firms were liable for $1.8 billion in damages, for allegedly conspiring to keep commissions artificially high. But when subsequent lawsuits started rolling in naming individual brokers, it got a lot more concerning.
It had agents asking themselves (and each other) a lot of questions, such as:
- How did NAR lose that argument, considering all the disclosures people have to sign, the listing contracts they willingly agree to, and the fact they can sell their own house and don’t have to hire an agent at all?
- How is it OK for the lawyers representing sellers to take a huge cut of the money, likely leaving the actual sellers with dimes on the dollar… yet the industry is accused of charging high commissions?
- And, most importantly, do I need to worry about getting sued personally by sellers I helped?
1 Out of Every 4 Agents Gets Sued in Their Career
While you have every right to be concerned, keep in mind that this isn’t the first, last, or by any means only time agents have gotten sued. In fact, according to this article, 25% of agents get sued in their career for a lot of other reasons, such as:
- Not disclosing a material fact.
- Failing to recommend getting appropriate inspections.
- Failing to identify potential issues that should have been obvious to an agent.
- Not properly reviewing or advising a client about the terms of a contract.
- Making exaggerated claims about the features of a property.
- Not putting enough emphasis on a disclosure, or not explaining it thoroughly enough.
- Not living up to promises they made to a client.
- Issues over missed contractual timeframes and deadlines.
- Working with clients in an area they are unfamiliar with, or not qualified to handle.
But that’s not really news to most agents, so much as it’s a reminder that it can happen. The fact that an agent can get sued is something they drive home in licensing school. But as you spend some time in the field with clients, it kind of fades into the background for the most part. At least until something like these lawsuits hit the news, you make a mistake, or simply have a client that’s difficult to deal with. Then the fear creeps back in.
7 Tips Lawyers Give to Prevent Getting Sued
The bottom line is you need to take some precautions to protect yourself and try to avoid lawsuits as much as possible. For instance, here are 7 tips the lawyers at Provident Law specifically recommend to help real prevent estate agents from getting sued, and protect themselves if they do:
- Incorporate. Setting your business up as an LLC or corporation won’t stop you from getting sued, but it’ll at least protect your personal assets if you do.
- Make sure you (and your clients!) disclose everything. Failing to disclose something topped the list above, and it’s also what these lawyers claim is the cause for most litigation. So make sure every appropriate disclosure form is filled out thoroughly and accurately, and that each party acknowledges that they have received and reviewed it.
- Don’t represent both parties in a transaction. While dual agency is certainly legal in many areas if both parties understand what they’re getting into and consent, it’s still risky. While clients may say they understand what they’re agreeing to, and even sign something saying so, conflicts of interest can easily arise, and have you facing a lawsuit.
- Don’t ignore complaints. Getting hit with a lawsuit usually doesn’t come out of the blue. If someone brings up an issue, concern, or complaint, listen carefully and make sure they know you are listening and will do what you can to rectify the problem immediately.
- Make sure you document everything. If it’s not in writing, it’s pretty difficult to prove something. So make sure to memorialize anything you speak about with a prospect or client in writing, and then keep all of your emails, notes, and text messages for years to come.
- Stick to giving advice you’re qualified to give. Don’t give legal or financial advice; leave that to lawyers and accountants. And while you may go to hundreds of home inspections, unless you’re a licensed inspector, don’t give advice on what is wrong or not wrong with a house.
- Get insurance coverage. In the least, make sure you have errors and omissions (E&O) insurance, but also check with your insurance agent or company for other recommended insurance coverage you can purchase in case you are sued.
All solid advice you’ve probably heard before…
…But How About Adding This to the List?
It’s almost impossible to dictate exactly how a relationship with a prospect will unfold from day one all the way through closing day. Even the most methodical, process-oriented agent has to roll with the flow when it comes to the path a buyer or seller takes with them.
But there’s always a beginning — a first point of contact, or meeting. Nobody can turn into a client or follow any route to the closing table without at least meeting you for the first time in some way, shape, or form.
More often than not, you’re not going to seal the deal with a prospect on that first contact. Unless it’s a rare client who’s in an absolute rush — and/or you’re a harcore closer — you’re unlikely to get a potential buyer to sign an exclusive agency agreement, or a seller to sign a listing agreement the first time you communicate.
Because each journey is different, it’s easy for an agent to forget, or simply not have the opportunity to discuss, things that a client should know about the process of buying or selling a house. Things that could help avoid misunderstandings, or outright mistakes that lead to a lawsuit in the future.
Which is why you might want to consider creating buyer and seller guides that you can give prospects as early on in the process as possible. That way you can make sure everything you want a client to know about the process is in writing, and in their hands, so you don’t have to worry about some aspect or nuance falling through the cracks.
Here are a few tips for creating your own guides:
- Plan on having at least two of them; one for sellers, and one for buyers.
- Jot down everything you can think of that you want every buyer or seller to know about the process. Don’t just stop at the basics, dig deep and get into how they might think and feel during the process as well! Get into things that you know buyers and sellers struggle with, or question, even if they don’t say it out loud sometimes. Answer things they’ll never even think to ask.
- Put the ideas and topics in some logical order and create a table of contents.
- Write as concisely as possible about each topic, but write as much as you need to make sure you are clear and they’ll truly understand what you need them to know. People don’t want or need a long-winded book. They’ll be more likely to read it if you keep it short and to the point.
- To encourage them to read it, make sure your writing is conversation, and perhaps even fun to read. Of course you need to keep it professional and authoritative, but that doesn’t mean you can’t sprinkle in some personality!
- Format them so you can send them digitally as a PDF, and also as printed booklets.
- Give or send every buyer or seller prospect a copy of your guide as early on in your relationship as possible, ideally the first time you speak.
- Have them acknowledge receipt so you have some proof that you gave one to them. That way you can at least show that you try to make sure all of your clients know what to expect throughout the process, and have done your best to fully inform every person you work with.
- While you can’t make them read your guide, you can certainly encourage them to by creating a series of follow-up emails to send them after you’ve given them a guide, with each email touching on a particular topic in the book. Not only will this encourage them to read what you sent, but it also creates an opportunity for back and forth conversation about the topics.
Even if they don’t read it, at least you can show that you give each client something that explains the process, and shows that you care about them being fully informed.
But, if done well, you’ll be amazed at how many clients actually refer back to things you cover in your guide during the time they work with you! They may even forward it, or lend their copy to someone they know who is thinking of buying or selling.
Once you have a universal guide for sellers, and one for buyers, you may even want to drill down into some niche types of guides, such as ones for:
- First-time buyers
- Buyers who are looking for new construction homes
- Sellers who are downsizing
- Buyers who are relocating from out of area
- Sellers who are relocating out of area
- People who are selling their home after having their listing expire with another agent
- Sellers who are going through a divorce
- Beginner investors looking to buy their first investment property
Don’t be overwhelmed by all of the potential options, though! Just having a solid buyer and seller guide to give out is better than most agents have.
But if you like the idea of having all of those at your disposal, and would like to skip past all of the work it’d take to create them, you should check out our Inner Circle membership.
As a member you’ll have access to not only an amazing seller guide and buyer guide, but all 20 of our Branded Booklets, including all of the ones listed above, and each one has a series of pre-written follow-up emails for you to send after giving one to a prospect.
All of those guides can be ready for you to offer buyers within a few minutes, by just entering your own contact information and branding so it looks like you actually wrote them. You can also edit every one of them to your liking, but they’re written in a fun, interesting, conversational tone that your prospects will enjoy reading, so the chances are you won’t even want to.
In addition to the Branded Booklet guides, you’ll also have access to tons of other marketing content you can add your own branding to, like:
- Our signature Lighter Side memes, and exclusive ones only available to our members
- Witty postcards
- Over 1,500 articles you can use to entertain or build credibility and authority, with new ones published each week
- Hundreds of other email and letter templates
- Access to our members-only Facebook group where some of the nicest, coolest agents in the business share marketing tips, including how they have used the Branded Booklets themselves
All of that content can be used for you to educate and entertain clients from before they’re even an official client, and to constantly stay in touch and top-of-mind years after their closing.
Obviously, if you do something absolutely wrong that hurts a client financially or otherwise, a lawsuit is always a possibility. But using helpful guides and a robust content marketing campaign can help to create a more educated client, and a more trusting relationship between you, which will hopefully help you avoid lawsuits by creating a better, deeper, more communicative relationship with your clients.
