In today’s ultra-competitive market, real estate agents tend to offer a variety of services outside of their normal services as a way to appease clients and offer them a more complete package. Most agents will adopt parallel functions such as property management, title closing and appraisals. However, though these services may be in a similar industry, if real estate agents aren’t properly trained in these areas, they can unintentionally make errors or omissions that could essentially put them out of business. As real estate agents adapt their services to keep up with the needs of their clients and communities, they also need to adapt their insurance coverage to ensure they aren’t putting their business on the line with each transaction.
Errors and omissions (E&O) coverage is almost like malpractice insurance coverage for real estate agents. Even the most organized and detailed real estate agents can make mistakes. A simple miscommunication with a client is enough to lead to an E&O claim. Here are five ways real estate agents can benefit from E&O coverage:
When a sale falls through. A transaction error that results in a sale falling through, even if the error is not the agent’s fault, can lead to an E&O claim. In addition to the monetary investment, clients tend to invest a lot of emotion into their purchases. The backlash resulting from a client losing their “dream house” due to a simple error can tarnish an agent’s reputation.
Failure to advise. Real estate agents are required to disclose certain types of information about a home if they are made aware of it by the seller or the seller’s agent. Agents often spend their own time researching a home to ensure no information is left out, however they may still miss something. Failing to disclose information to a buyer can result in an E&O claim, with the burden of proof falling on the agent to prove their ignorance.
Commingling or mishandling of funds. Taking on additional services such as appraisals, title closing and property management comes with additional monetary responsibilities. Agents who fail to collect deposits or rent payments on behalf of their clients, make mistakes in their bookkeeping, commingle escrow money with general company funds or lack proper bonds for handling escrow money may find themselves tangled up in costly E&O claims.
When an agent assists clients with the eviction process, there are many things that can go wrong. A simple mistake such as the amount of time given for a notice to vacate can be grounds for a claim. When tenants are facing an eviction they will often use any means necessary to stay in the property, which means if the eviction notice doesn’t follow state eviction laws to the letter, it can be used as a claim against the agent.
Subcontractor negligence. Real estate agents are trusted by their clients and will often be asked for recommendations on subcontractors for certain projects. Unsatisfied clients may hold the real estate agent partially responsible for negligent actions done by subcontractors and include them in an E&O claim in order to recoup damages done by the subcontractor.
About Huntersure
Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding and policy issuance and tailored products to meet the needs of your insureds. Give us a call at (646) 751-3030 to learn more.
