The Real Estate Broker's Top 5 - Practical Tips for Avoiding Common Liabilities

By Geoffrey M. Gold, Rutter Hobbs & Davidoff Incorporated

RISMEDIA, Jan. 26, 2009—Real estate brokers are vulnerable to lawsuits with each transaction they handle. Whether new to the career or a veteran, there are five practical tips that every agent can employ to minimize risks and identify early on those issues that can potentially lead to lawsuits. Inherent to acting as a professional real estate broker are ethical and legal duties and obligations, both to the industry and to the buyers and sellers being represented. Stringent adherence to these duties can help make a broker’s career more manageable and provide protection from transaction pitfalls.

Some of the most common issues that arise are also those that keep attorneys very busy, and avoiding these familiar problem areas can prevent most misunderstandings and disputes from ever entering court:

• Resist the Temptation to Act as a Dual Agent – More lawsuits occur from this agreement because of the arrangement’s innate conflict of interest. Possession of secret information frequently leads to one side being favored, and the best way for a broker to avoid questioning about where his or her loyalties lay is to begin the relationship representing just the buyer or just the seller. 

• Satisfy All Obligations to Provide Full Disclosure – From the condition of the property and its market value to providing an accurate assessment of the state of the neighborhood, it is imperative that brokers disclose all information relevant to a transaction. Especially important is the need to disclose multiple offers and the real worth of the property with undivided loyalty.
  

• Give Clients the V.I.P. Treatment – Although most brokers want transactions to close as quickly as possible, and may be involved representing multiple clients at any given time, it’s important to always remain responsive to each client and actively work to give each client the attention they deserve. This includes returning calls promptly and patiently listening to client concerns and questions so as not to appear negligent at any point in the relationship. 

• Establish a Schedule for Regular Communication – Lack of communication can lead to misunderstanding and subsequent frustration for clients. By agreeing on a regular schedule of communication, clients will always feel “in the know” and will not be prone to incessantly calling the broker. 

• Maintain Honesty at All Times – Brokers can make all the difference when it comes to successfully marketing a property and helping to close challenging transactions. An honest and careful broker will protect his or her client and look out for the client’s best interest at all times. Brokers should provide clients with a written plan that details what kind of marketing will be performed and the basis for the proposed listing price, then commit to faithfully executing that plan – vetting all offers and giving fair opportunity for bids to avoid any potential legal woes.

A broker is by definition a fiduciary, one who owes the highest duties of care, full disclosure, and loyalty. By understanding the issues commonly raised in lawsuits and avoiding those problem areas during transactions, real estate brokers can effectively reduce their risk.

About the Author: Geoffrey M. Gold is a trial lawyer with Los Angeles-based Rutter Hobbs & Davidoff specializing in business and real estate matters, as well as chairman of the firm’s Litigation department. He has successfully litigated hundreds of cases over the past two decades on a variety of issues, including issues arising in commercial and real estate transactions and pertaining to brokers, neighbors, and lease or buy-sell situations. Clients appreciate Gold for his proven track record, and ability to keep costs under control. He frequently acts as outside general counsel for small business clients and special counsel for large companies, and has particular expertise in working with developing businesses and assisting individual and corporate clients with their everyday legal affairs. To contact Geoff Gold, call 310-286-1700 or e-mail ggold@rutterhobbs.com. 

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