How North Texas Realtors Can Limit Their Liability
In a world where litigation is the
preferred method of resolving even the most minor conflicts, it
should come as no surprise to real estate agents that they are
increasingly finding themselves named as defendants in law suits
wherein purchasers of residential real estate are claiming
damages as the result of the alleged fraud and/or negligence of
one or more of the participants in the transaction.
Aggrieved purchasers of residential real estate are operating in
a target-rich environment and have a remarkable array of
potentially responsible parties from which to seek financial
redress for their claimed grievances. In lawsuit after
lawsuit, one finds multiple defendants: the sellers, the
sellers’ agent, the sellers’ agent’s broker, the buyers’ agent,
the buyers’ agent’s broker, the home inspector, the pest
inspector and so on; multiple counts: fraud, negligence, breach
of contract; and, generally, hundreds of allegations against the
various defendants.
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Once a lawsuit has been
filed and you have been named as a defendant, you can kiss your E &
O deductible goodbye. Even if you are blameless, which in the
overwhelming majority of instances you are because the overwhelming
majority of these types of lawsuits are completely devoid of merit.
The size of these Complaints and the sheer number of their
allegations guarantees it. No competent lawyer could possibly
read and respond to the vastly overblown pleadings that normally
characterize these types of lawsuits for anything close to the
typical real estate agent’s E & O deductible.
Therefore, the best strategy is to avoid being named in the suit in
the first place. Fortunately, there are a number of effective
policies that, if followed, can sharply reduce and even eliminate
your exposure to being named in a meritless lawsuit.
Lawsuits
resulting from a residential real estate transaction almost always
result from a feeling on the buyers’ part that they got less than
they bargained for. After they moved into the property, they
discovered that it was not all that it was cracked up to be.
Sometimes the alleged defects were present at the time of the home
inspection but for one reason or another were not discovered by the
home inspection. The fact that the alleged defects were not
discovered by the home inspector does not automatically mean that
the home inspector was negligent or that you were negligent for
recommending the inspector. Far from it.
There could
be a large number of reasons why the alleged defect was not
discovered at the inspection that fall well short of actionable
negligence. The defect could be something that is not
discovered because its inspection is simply not contemplated by the
home inspection, a determination of the adequacy of any structural
system or component, for example. Such a determination
is outside the scope of a home inspection. Or it could be
something that is not reported because it was concealed by furniture
on the day of the inspection or was located in an area that was
inaccessible. Not infrequently, known defects are deliberately
concealed by the sellers. And far more frequently than anyone
would imagine, the alleged defect that is the subject of the buyers’
complaint was actually discovered by the home inspector, noted in
the inspection report and not acted upon by the buyers because they
did not bother to read the inspection report.
Therefore, when selecting a home inspector for your client, you
should bear uppermost in your mind that the home inspector is your
first line of defense against a meritless negligence claim.
Top Ten Ways
Realtors Can Reduce Liability
Exposure:
1.
Insist that your client
hire a professional home inspector to inspect the property and
strongly recommend that the inspection also include ancillary
inspections for the presence of wood destroying insects and such
harmful pathogens as mold and radon.
2.
Take the time to manage
your clients’ expectations of what can reasonably be discovered by a
limited visual inspection of a property that is full of furniture,
carpets and stored items that further physically limit the scope of
an already limited inspection.
3.
Be sure to carry your own
Professional Liability Insurance to protect yourself from
allegations that you should have independently verified that the
property was defect-free.
4.
Review the inspector’s
Pre-inspection Agreement to make sure that it contains a Notice
Clause that requires the buyers to notify the inspector within no
more than 14 days of the discovery of any defect for which they
believe he is responsible.
5.
Avoid conflicts of
interest. Never recommend an inspector who participates in
preferred vendor schemes. All major inspector associations prohibit
participation in such undue praise-purchasing schemes. You
have a fiduciary duty to recommend the very best inspectors, based
solely on merit, not money. And it goes without saying that you
should never recommend any inspector with whom you have a close
personal or blood relationship.
6.
Recommend the high value
inspector, not the low price inspector. Good inspectors charge
accordingly. Trying to save your client $100 on an inspection
could cost them $10,000.
7.
Only recommend inspectors
who adhere to a strict Code of Ethics and Standards of Practice,
such as members of InterNACHI.
8.
Always attend the home
inspection. Many real estate agents have been advised never to
attend a home inspection, allegedly by real estate
attorneys. Agents who say that they have received such advice are
never able to articulate its rationale. You are not any less
likely to be named in a suit by hiding during the inspection and the
reasons for attending
the inspection are quite compelling. First, your presence is a
clear indication of your professionalism and concern for your
client’s interests, two factors well-known to engender referrals.
Secondly, it affords a very cogent opportunity to refocus your
client’s attention to the limited nature of the inspection.
For example, you could note the numerous obstacles, such as
furniture, carpets and appliances that can obviously inhibit the
inspector’s ability to see certain areas of the home. Finally,
should this transaction come to grief, your interests are usually
perfectly aligned with the inspector’s and your recollection of such
limiting factors would provide powerful corroboration of the
exonerating reasons that a defect was not discovered during the
inspection.
9. Use an InterNACHI home inspector
such as Selman Home Inspection that provides a
FREE 100 Day Limited Warranty.
10. Use a professional home inspection
company that carries E & O insurance, liability insurance, and
commercial vehicle insurance such as Selman Home Inspection Company.
Courtesy of
Selman Home Inspection Company.
“Accurate Investment
Protection You Can Trust”.
Selman Home Inspections of North Texas
"Accurate Investment Protection You Can Trust"
469-371-3228
