The following Ask the Expert column features Michael Ryder, the National Program Director for Specialty Programs with Norman-Spencer Agency, Inc.
Q: What are the top risk management practices real estate professionals should adhere to when representing a client?
A: For most people, buying or selling a home is the single largest financial transaction they will be involved with during their lifetime. As such, most will engage the services of a real estate professional to assist them in the process, believing that the agents’ skill set, knowledge and integrity will help them consummate the deal smoothly and without problems arising.
However, despite your diligent representation of the client, not every transaction goes smoothly. When something does arise that throws a wrinkle into the process, you stand a better chance of mitigating the issue if you have adhered to the following four risk management practices:
1. Explain the Process. The buying and selling processes can be complicated, which is why it is essential that agents clearly explain what to expect in each part of the transaction, along with what responsibilities each party has to the contract to help ensure no snags or delays occur. Failure to do so can lead to an uninformed client, which can create tension, delays or mistakes.
2. Promptly Return Calls and Emails. Maintaining an open line of communication with clients is one of the most important things an agent can do during the course of a real estate transaction. If clients aren’t kept in the loop, they could blame the agent for a small mistake that causes an issue in the transaction. If this becomes serious enough—and leads to financial losses—a lawsuit could be the result. Real estate agents that want to reduce the risk of being sued would be wise to stay in constant communication, including making themselves readily available to clients. For this reason, agents should always return calls and emails in a timely manner.
3. Document, Document, Document. Clients tend to have selective memories when problems or issues arise, especially ones that hit their pocketbook. To better protect yourself against Client Selective Memory Syndrome, you should keep good notes on all conversations that are material to the transaction and also write the client a short follow-up note/letter/email memorializing what was discussed. Doing so helps mitigate the likelihood that you will become involved in an Errors & Omissions claim.
4. Maintain Comprehensive Errors & Omissions Coverage. Make sure you have a policy that affords comprehensive coverage. Some do, some don’t, so be sure to advise your insurance agent of all real estate services you engage in so they can place you into a program that covers you adequately. Feel free to compare your current policy against the comprehensive policy offered by Norman-Spencer Agency by visiting our website: www.norman-spencer.com/programs/specialty/real-estate. If your insurance agent doesn’t already work with us, we can recommend one who does.
For more information, visit www.norman-spencer.com.