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Legal Issues Facing Brokers

| Apr 11, 2017 | Uncategorized


In real estate, it is common to for there to be some legal pitfalls. This will result in lawsuits between buyers and sellers against their broker or agent. This can occur because of misrepresentation, nondisclosure of property conditions, breach of duty, unlawful discrimination, or for other reasons. Although these real estate cases are very common, it is estimated that 75% of real estate license holders are usually found not liable. There are some cases that are more common than others, and there are plenty of ways to prevent situations like these from happening.
According to statistics, 57% of these lawsuits are due to misrepresentation. 12% of these cases are due to a similar situation. Misrepresentation means that there was some information or feature of a property that was misstated or not revealed. Usually it is common for information in regards to the foundation or structural features of the property to be wrong or misconstrued. Although this is one of the most common aspects that are misrepresented, there are plenty of others such as property boundaries, roof problems, or the finding of termites. Misrepresentation can fall under 3 categories. These categories are innocent, negligent, or fraudulent. Negligent means that the failure to disclose information was due to ignorance. Fraudulent refers to a scenario in which a feature of the property is purposely hidden. To avoid a situation like this, you will definitely want to make sure you never make predictions. Document the seller’s sources of information and encourage others to use inspectors or attorneys.
Another common lawsuit that usually occurs is when there is a problem with the agency or a breach of fiduciary duty. This means that a problem will usually happen with a transaction which leaves one party seeking legal advice. To avoid a problem like this, it is important to know your state’s laws. When speaking to a broker you will definitely want to know what their exact duties are and what you can expect. The use of agency disclosure forms will definitely be of assistance.
If a seller does not want to sell their home to someone based on their race, background, sexuality, or for a reason similar, this becomes a fair housing violation. This does not occur often, but can be a very costly judgement. A model equal services report form is a strong tool that is used against a claim of discrimination. Again it is important to make sure that you are educated on the fair housing laws. 

Antitrust are laws that prevent unreasonable restraints of trade. Competing brokers should not talk about the amount of compensation or commission rates that they offer cooperating brokers. You also want to avoid anything that could lead to allegations that you agreed to not do business with a certain competitor.
False or misleading advertising is also the cause of many lawsuits. This has especially become an issue due to online advertising. Advertising must always comply with state license law and regulations. It must also follow the Realtor Code of Ethics. To avoid a situation like this, you must closely look at all of your ads to make sure the information is truthful. Complying to all the rules and laws is a must.
According to statistics 90% of the industry’s brokers use independent contractors as their sale force. It has become easier for real estate salespeople to become independent contractors. There are factors that have an influence on this though. To limit your employment liability, you are going to want to educate yourself on the laws in regards to independent contractors, use written agreements between you and your sale associates, and create an employee handbook.
A broker is supposed to have someone with expertise property evaluate any potential hazards such as groundwater contamination, lead-based paint, asbestos, etc. When the broker fails to do this, it usually will lead to a lawsuit. A way to limit environmental liability is by staying educated. It’s important to know the common environmental issues in your area. Make a list of inspectors and resources to give out to costumers.
These are just some of the common lawsuits that can occur in real estate law. Check out our source for more information and other common real estate issues. It is important to make sure you are always educated about your state’s laws and regulations. If you are in need of a real estate lawyer, do not hesitate to call Palacios Law Group.
Source: Realtor Mag 


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