Lawsuits against Realtors increased by 9% in 2022 – yikes! This was likely fueled by the real estate feeding frenzy of recent years, and the frequency of contracts where the Buyer waived certain contingencies in order to be more competitive. According to Victor Insurance Managers, a global insurance underwriter, more of the 40 million actions filed in the US are against agents and brokers. The cost to Realtors? Higher premiums, time, and energy.

The hidden cost – a busy season which may pass you by due to lawsuit distractions. 

Matt Alegi, a prominent real estate attorney in the Washington, D.C. area, digs deeper in the increased litigiousness of the last few years. Buyers had to move fast or be out bid in multiple offer situations. Many waived inspections in order to get the property.

“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.  They’re having buyer’s remorse. They’re upset and they want someone to pay,” he says.

What to do?

In Alegi’s opinion, most suits could have been avoided if the Buyers got an inspection. “Agents need to be clear with their clients that not having an inspection contingency is different than not having an inspection. Inspections do not blow-up deals unless there is something really, really wrong”. In other words, waiving the inspection does not eliminate the importance of having one.

Agents are being sued for non-disclosure, negligence, misrepresentation and other legal theories.

A Note From Christian: Be careful of situations where you are pushing your Buyer to waive contingencies or, more importantly, failing to listen to your client before making suggestions. Even if you believe that the only way to get an offer accepted is to waive an inspection, make sure to offer your client all of the options and to properly explain the downsides with waiving. 

Practice Tip 1:  I always recommend that a Buyer “sleep on it” when they first state they do not want an inspection.

“Hi Tim, I know the inspection is expensive, but I really think it is important. It may be too late after the closing. Please sleep on it, and we will chat tomorrow.”

This type of email achieves multiple goals:

  1. You have something in writing recommending an inspection;

  2. The email expresses sincere concern, rather than the blatant CYA email stating “This is to confirm our conversation where you refused an inspection”; and

  3. You encouraged your client to “sleep on it”, or reconsider they initial decision.

In my own personal and business experience, sleeping on a decision frequently results in a different outcome. In fact, many of my own clients actually change their minds after a good night’s rest and further conversation with their partner. Famous executives such as Warren Buffet and Jeff Bezos advocate morning decisions.

Practice Tip 2:  The morning after the “sleep on it” email, call your customer and follow up on the decision. If the answer is still “no” to an inspection, make a note on your copy of the email that your client said no, and put the copy of the email in your file. The hard copy of the e-mail, along with the hand written note,  may be admissible in court. Every little bit helps!

Thank you so much for using Ross Title and Ross Law for your real estate needs. We happily answer your questions as well as your customer’s questions. Receiving prompt advice can really help.

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