- Agents should read their errors and omissions insurance policy to see what it does and doesn't cover.
- Tasks outside of unlicensed activity may give rise to denied claims. Performing such tasks may also be inefficient.
- That said, claims are almost always disclosure-related, according to the California Association of Realtors' general counsel.
When a real estate agent lists a home, some things are standard: marketing the home, collecting and negotiating offers, shepherding the transaction from contract to close.
But there are any number of other tasks that can land on a listing agent’s shoulders during a deal, from the mundane (dog walking, anyone?) to the significant (for example, making repairs).
In the latter cases, could performing those services land the agent in legal trouble if something goes wrong?
The answer may hinge on that agent’s errors and omissions insurance.
Do: Always read your policy
Agents should read their E and O policy to determine what is — and isn’t — specifically covered, June Barlow, general counsel and vice president for the California Association of Realtors, told Inman.
“The real issue here is whether or not it’s a professional service that’s covered” and how “professional services” are outlined in the policy, she said.
“If you decide to walk the dog and [something happens to the dog] and it’s a valuable dog, is insurance going to cover that? I don’t know — is that considered a professional service? You’d have to do that at your own risk,” she said.
Some types of services that an agent might think are covered, such as property management, may be excluded in some policies, Barlow said. For example, if an agent’s seller client rents the home for a period of time after the new buyer purchases it and the agent collects the rent from the seller, that would probably not be covered.
When it comes to something like doing or supervising repairs, “it’s not clear that that’s considered a professional service by most E and O policies, so at the very least you’re asking for an argument,” Barlow said.
“The further away it is from licensed activity, the more you may have issues with having a claim denied,” she added.
In some states, brokers are required to purchase other types of insurance, such as workers compensation insurance, for their salespeople. But that type of coverage also depends on whether the agent was performing work responsibilities at the time of an injury.
Suffering a fall while walking the seller’s dog, for instance, might not count, Barlow said. Suffering an injury while moving a seller’s furniture for staging could be a different story — it all depends on the insurance policies involved.
What agents should really worry about
All that being said, these kinds of tasks don’t appear to be the kinds of things that inspire clients to sue. CAR works with an E and O insurance provider and Barlow said she can’t think of a single claim having to do with tasks like cleaning, staging, repairs, dog-walking.
“[Claims are] almost all disclosure-related,” she said.
“Property defects, neighborhood conditions. Usually something that comes as a surprise about the property that they didn’t know about.”
Don’t: Give specific legal advice
“If you give very specific legal advice and they rely on it and it turns out to be wrong, then that’s a very big problem,” Barlow said.
Does that extend to clients wanting to know what the property tax is on a home?
“That’s actually tricky,” Barlow said. In California, how much property taxes rise from year to year depends on Prop 13. Most clients will want to know how much they can expect their taxes to rise after they buy, but it’s best not to guess, Barlow said.
“It’s difficult because real estate agents may know the answer and want to be helpful,” she said, but the best thing to do is give clients pre-produced materials from a reliable source and have them verify the information themselves.
“Tell them, ‘See how this applies to your situation by talking to the appropriate professional,'” Barlow said.
Agents should not go beyond their own “competency core” and expertise, she added.
Do: Decide whether you should do something, not just whether you can
It can be tempting for an agent to do everything that needs to be done to get a listing to sell.
“When I think about what I do… the answer is pretty easy. WHATEVER needs to be done. Walk the dog, clean up after the cat, provide updated market analysis, etc. etc. etc. The list is quite endless,” wrote one agent on a thread in the Raise the Bar in Real Estate Facebook group.
“One of the blessings of our business, is no 2 deals or transactions are EVER the same. One seller may need more assistance or guidance than another.
“Providing a unique, personalized service, is what I am being hired to do. With the exception of providing TAX or LEGAL advice to a seller, there is very little I haven’t or won’t do.”
But not everyone agreed that this was the most efficient way to work, preferring to outsource tasks outside of their core services.
“I’m a RE broker. I list, market and sell. I help sellers achieve their goal of selling property for the highest and best price in the shortest possible time,” one broker said.
“I’m licensed and qualified to advise about real estate. While I may be some what knowledgeable and try to stay informed and updated about other important ancillary aspects of real estate, I’m not an attorney, accountant, mortgage broker or banker, decorator, contractor, furniture salesman, mover, dog-walker or maid.
“I have a team of professionals I work with that provide professional non-broker services.”