Example Claims For Realtors

10 awkward examples of times real estate agents have had to face legal penalties for simple mistakes. 

Don't forget to cover yourself against mayhem like this with a realtor business owner policy from Cullen Insurance.

Two buyers alleged age discrimination in the brokering of the condo unit. The matter was settled for $7.5K and defense costs were around $15K. Even when a case is settled there were court costs, depositions, and attorneys’ fees.

Real estate agent acted as listing agent and broker for sale of residential property adjacent to a lake. Upon property purchase, the buyer alleged that the agent misrepresented the property as waterfront when it did not in fact extend to the water’s edge. The Buyer claimed damages for loss of value, cost of abatement, fines and mental anguish. 
Defense costs of more than $40K.

Real estate agent was retained by a bank to list and remove all garbage from or “trash out” a foreclosed property. A suit was filed against the bank, mortgage servicing company and real estate agent for wrongful eviction and destruction of property. A situation like this can be a long litigation process with defense costs of over $200,000 before a settlement.

While holding an open house, a guest trips and falls sustaining a back injury. As the injury results in surgery and the guest cannot return to work, he brings a claim against both the homeowner and you, alleging improper lighting and failure to warn. Insurance policies can provide liability coverage for any negligence, up to the full limits of the policy, less any deductible, in your capacity as a real estate agent or broker.

You were the seller’s agent. Prior to the sale of the property, you received a call from a neighbor complaining that a waste dump on the subject property was damaging their property. Although you provided this information to the buyer’s agent, the buyer alleges they never received this information prior to closing. The buyer brings a claim against you for failing to advise them of the waste dump.

To avoid liability, look for coverage for failing to advise of the existence of pollutants, fungi, or bacteria in your capacity as a real estate agent or broker.

A couple consulted a real estate agent to purchase a home in which they could also run a daycare business. The agent showed them a townhouse, which they eventually purchased. After closing, the couple was told by the townhouse association that they were forbidden use of the property for a daycare business. The couple filed suit for negligence feeling they had been misled.

A couple asked their real estate agent which school district the residence was located in. The real estate agent mistakenly told the couple the wrong school district. The couple purchased the property and discovered that their children were to attend a different/inferior school district. They sued this real estate agent for misrepresentation.

Three months after closing, Kate received this letter from her buyer clients: “Remember when you recommended an engineer to look at those cracks in the basement? Well, they’re getting worse, and we think you should have insisted on us hiring an engineer to look at the defect.” Kate immediately went to the buyers’ home to examine the cracks. The cracks had definitely expanded, so Kate arranged for an engineer. The buyers seemed satisfied.

A year later, Kate and her broker, Dan, were now in litigation, with the buyers claiming that Kate had a “duty to insist on an engineer.” Legally, Kate had no such duty, and the case ultimately would be settled. But in the meantime, there were court costs, depositions, and attorneys’ fees.

When a family with a two-year-old boy moved into a house that was more than 100 years old, they had no idea that the house was covered in lead-based paint. The reason they were unaware of this was because the real estate agent never informed them of the contamination when they purchased the house. Forgetting to inform a buyer about important information given to you by the seller can be covered under error & omissions as part of your liability insurance.

A year later, Kate and her broker, Dan, were now in litigation, with the buyers claiming that Kate had a “duty to insist on an engineer.” Legally, Kate had no such duty, and the case ultimately would be settled. But in the meantime, there were court costs, depositions, and attorneys’ fees.

It is important to understand that agents are liable for any lost or damaged property during showings. It does not matter how it happened. Even if the agent is in no way personally responsible, they will be held liable in the claims process.

Cover yourself with a business owner's policy suited to real estate agents.