Even though the extreme seller’s market is in the rearview mirror, disgruntled clients have been filing more lawsuits against their agents, according to an analysis by Victor Insurance Managers.

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The freewheeling era of waived inspections may be coming home to roost, as a growing number of recent homebuyers are pointing the finger at their real estate agents — in court.

Victor Insurance Managers, a large underwriting firm, reports it saw a 9 percent rise in errors and omissions lawsuits against real estate professionals in 2022. 

These lawsuits have also become even higher-stakes ordeals in recent months, running an agent or broker an average of $39,000 in a typical losing case. That’s 13 percent higher than it was in 2021, Victor Insurance Managers reports.

The housing market has since come down off its roaring highs of 2021 and early 2022. That peak, spurred by historically low mortgage rates and a frenzy of buyer demand, saw more homes land in intense bidding wars.

And buyers, in their desperation to land a home, often waived protective contingencies, such as those allowing them to back out of a contract after a troubling inspection.

In some of these cases where buyers sue their agent or broker, the buyer waived their inspection contingency and later discovered an issue with the property, an attorney told the publication Real Estate News.

“People are already thinking they overpaid for their house and then the water heater breaks or they start renovating the basement and they find mold,” attorney Matt Alegi told the publication. “They’re having buyers’ remorse. They’re upset and they want someone to pay.”

Alegi told the publication that his firm, Shulman Rogers in Washington, D.C., has seen the increase in caseload firsthand. Alegi heads the firm’s real estate law department.

A number of these lawsuits could have been easily prevented with better communication between agent and client, he said.

“Agents need to be clear with their clients that not having an inspection contingency is different than not having an inspection,” Alegi told Real Estate News. “Inspections don’t blow up deals unless there’s something really, really wrong.”

In addition to providing better disclosure to clients, real estate brokers can also protect their business from litigation by educating their agents and installing thorough processes to document those particularly tricky conversations with clients in written form.

Victor Insurance Managers points out that the costs are partly going up because of how supply-chain disruptions and high demand for home renovations have distorted the cost of repairs in recent years. When a real estate professional loses a lawsuit, that means they’re usually the one footing the bill.

Email Daniel Houston

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