Lawsuits are a real part of the job that agents must be aware of to protect themselves, their assets and their businesses.
According to a prominent law firm, there has been a recent increase in lawsuits against real estate agents and brokers that spans the entire country.
Even though the National Association of Realtors says that only 25 percent of those sued are ultimately found liable, it’s something every Realtor should be concerned about. Especially considering that, according to the Court Statistics Project, a typical lawsuit involving contracts costs an estimated $91,000.
We all do our best to provide the best possible service to our clients, but sometimes our best isn’t enough. Lawsuits against agents can stem from a failure to disclose negative aspects of the property, breach of contract, giving legal advice, intentional misrepresentation and more.
For example, if a seller fails to disclose something about a home, the buyer could sue the you as the agent — even though you didn’t know about it. However, there are some steps you can take to protect your personal assets from lawsuits.
Limiting the agent’s liability
According to asset protection expert, G. Kent Mangelson from the American Society For Asset Protection, “All too often, people are named as defendants in a lawsuit because of their ability to pay — not because of fault or error.
“Most lawsuits are done on a contingency basis, so one of the first things an attorney does before accepting a case is an asset search to see if the defendant would be worth pursuing.”
So, what can you do as a real estate agent to ensure that your assets aren’t wiped out in a lawsuit? Here are a few strategies to consider:
- Understand that you don’t have to do something wrong to be sued. In America, a lawsuit is filed every 30 seconds, and many of them are frivolous. Unfortunately, even frivolous lawsuits cost thousands of dollars to defend.
- Attorneys look for plaintiffs whose assets are easily reached. By structuring your personal and business assets in a legal structure called Family Limited Partnerships (FLP), it will make you unattractive to attorneys because they won’t be able to access your assets. This will deter lawsuits from ever being filed against you.
- You should never operate your business as a sole proprietor or corporation if you want to protect your assets from litigation. Instead, seek out a qualified asset protection expert to advise you on the benefits of structuring your real estate practice as an FLP or LLC that has been specifically designed to protect your assets.
- Unless you live in one of six states that don’t allow creditors to take homestead properties or file judgements against them, you should consider putting your home into a separate legal entity to protect it.
Finally, in an article written by finance expert Karla Lant, she notes that it’s important to know who you’re dealing with when getting expert asset protection advice. She provides a useful checklist that agents can use when looking for an asset protection company that is qualified to keep your wealth safe from lawsuits and litigation.
Jackson Cooper is a writer and real estate enthusiast at Jensen and Company. Follow Jensen & Company on Twitter Or Facebook.
