Protect yourself

By Albert G. Marquis, Esq.

There are few things more expensive or more stressful than being named as the defendant in a lawsuit. A close second is being named as the respondent in an ethics complaint. Real estate agents need to develop business habits that will minimize either of these possibilities.

Applying the 90/10 rule, 10% of your clients will cause 90% of your problems. The best way to minimize such problems is to develop screening techniques in order to steer clear of the trouble-makers. Avoid people who appear to be chronic complainers. Be wary of those who have grievances against other real estate agents and shy away from those who have unreasonably high expectations–those who will never be satisfied no matter what you do. Develop the ability to say “no” to anyone who does not pass your “gut reaction” test. Let them become someone else’s problem.

In addition, real estate agents, like other business people, should develop the habit of documentation. Having attended 16 years of ethics hearings at GLVAR, we have repeatedly seen clients complain that “My real estate agent never gave me that document,” or “My real estate agent never told me that.” A contrary statement by the real estate agent simply boils down to one person’s word against another. But if there were documentation in the file–a receipt or a confirming letter--then the scales would tip in favor of the real estate agent. Develop the habit of documentation.

In order to avoid problems, develop the habit of utilizing good forms including GLVAR’s newly revised forms. These forms have been designed to eliminate ambiguities, which invariably lead to misunderstandings. In addition, the forms incorporate provisions that provide maximum protection for real estate agents. It would be foolish for a real estate agent to transact business without utilizing these forms.

Finally, shift the risk whenever you can. If an agent is not sure what action to take, he should seek the advice of his broker. If tax issues arise, refer your clients to their accountant. And if legal issues arise, refer the client to an attorney (not your attorney). Taking on such tasks yourself is a big risk. The prudent real estate agent shifts the risk to someone who specializes in that particular field whenever possible.

In this day and age, it is impossible to eliminate all the risks of lawsuits and ethics complaints. Nevertheless, good business habits can minimize the risks, which will in turn reduce your stress and free you up to concentrate on money making transactions.