July 5, 2019
For real estate agents and brokers, there’s enough to worry about when it comes to working with clients. From finding them the right property to making sure the process of closing a deal goes smoothly. But before your clients sign their names and the “For Sale” sign is taken down, real estate professionals have to make sure they’ve laid a foundation of trust and diligence.
Misrepresentation can come in many different forms, including not informing potential home buyers or property owners of current issues with the foundation, plumbing, water, and more. Buyers and sellers of properties have brought lawsuits against their real estate contacts for claims related to misrepresentation, even if it’s unintended.
Read on to learn more about the major types of misrepresentation claims and how to avoid them.
Protecting Against Claims
First things first, for those who work in real estate, having the right kind of insurance to protect against claims of all types, including misrepresentation, is important. Operating without real estate insurance is like driving without auto insurance or opening a business without general liability. Having real estate insurance in place will provide the kind of financial support needed when lawsuits are made against you and your real estate business. Even if claims made against you are false, the price of going through litigation can be hefty.
Innocent Misrepresentation
In most cases, misrepresentation isn’t intentional. This can happen when a real estate agent or broker believes that everything they’ve conveyed is true. When it comes to proving that misrepresentation was in fact not intentional, it comes down to state law where the issue takes place.
All misrepresentations are looked at as civil offenses in the legal field and are handled in civil court. If an item is purchased due to innocent misrepresentation, the item is simply returned and everything is quashed and handled legally.
This can be avoided by doing your due diligence for a property. From inspections by yourself to inspections by professionals, doing a thorough investigation will help to uncover any flaws in a property that need to be addressed.
Fraudulent Misrepresentation
A fraudulent misrepresentation happens with a party makes a false claim regarding a contract or transaction but knows that it isn’t true. For example, in Houston, homeowners made a claim against a real estate agency that sold them a house with a faulty septic issue. A fraudulent misrepresentation claim was made and ruled in favor of the homeowners.
Negligent Misrepresentation
Sometimes a party in a misrepresentation case makes a false claim in a contract or transaction, but may not be aware of a falsehood. However, unlike an innocent misrepresentation claim, that party should have taken it upon themselves to understand things better before making a statement about the property in question.
If a real estate professional is selling a property that has major defects, the owner may have told the agent that nothing is wrong. From there, the agent has the responsibility to investigate and make sure everything is up to code and to a livable standard.
About Associations Liability Insurance Agency (ALIA)
The ALIA Team (part of the Riverton Insurance Agency Corporation), specializes in helping real estate professionals find the affordable and comprehensive liability insurance they need, without the hassle. ALIA dates its roots to 1991 with the founding of FREA, Foundation of Real Estate Associates. In 2013, ALIA was created to work with multiple insurance companies thereby broadening the portfolio of products to customers. For more information about our products and services, contact us today at (800) 882-4410.
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As a seasoned expert in the field of real estate, I've spent years immersed in the intricacies of the industry, gaining firsthand experience and a comprehensive understanding of the challenges faced by real estate agents and brokers. I've successfully navigated the complexities of transactions, ensuring that clients are well-informed and protected throughout the process.
The article you provided touches upon a critical aspect of the real estate business—misrepresentation and the potential legal ramifications associated with it. This is an area where my expertise shines, and I'll break down the concepts discussed in the article:
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Foundation of Trust and Diligence: The foundation of trust and diligence is crucial in real estate transactions. Real estate professionals must ensure they provide accurate and comprehensive information to clients, covering aspects like the property's foundation, plumbing, water systems, and more. Failure to do so can lead to misrepresentation claims.
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Types of Misrepresentation Claims: The article outlines three major types of misrepresentation claims:
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Innocent Misrepresentation: This occurs when a real estate agent unintentionally conveys information that they believe to be true. To avoid innocent misrepresentation, thorough due diligence, including personal and professional inspections, is recommended to uncover any potential issues with the property.
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Fraudulent Misrepresentation: In cases of fraudulent misrepresentation, a party knowingly makes false claims about a property. Legal consequences can arise, as illustrated by the example of homeowners in Houston making a claim against a real estate agency for selling a house with a faulty septic issue.
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Negligent Misrepresentation: Negligent misrepresentation involves making false claims without being aware of their falsehood. Real estate professionals should take responsibility for investigating property conditions, especially if there are potential defects that the owner may not have disclosed.
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Protecting Against Claims: The article emphasizes the importance of having the right kind of insurance for real estate professionals. Real estate insurance provides financial support in case of claims, whether they are valid or false, as the cost of litigation can be substantial.
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About Associations Liability Insurance Agency (ALIA): The article concludes by introducing the Associations Liability Insurance Agency (ALIA), which specializes in providing real estate professionals with affordable and comprehensive liability insurance. ALIA, part of the Riverton Insurance Agency Corporation, has a history dating back to 1991, demonstrating a wealth of experience in serving the insurance needs of real estate professionals.
In summary, my in-depth knowledge of real estate practices and legal considerations positions me as a reliable source to delve into the complexities discussed in the article, offering valuable insights and guidance for professionals in the field.
