5 Legal Issues Real Estate Brokers Should Know

Written by Posted On Thursday, 16 August 2018 17:23

The romans used to say "Caveat Emptor" and that has translated into our current culture as "buyer beware". Nowhere is this type of thinking more evident than in the real estate market. Real estate brokers work on behalf of their clients in order to sell houses to people who are shopping around for a home. This unique position seeks a balance between offer and acceptance and in the course of that, we may find that certain legal issues arise. It's not uncommon to hear about clients thinking they have been wronged or scammed by their real estate broker. Inman concludes that real estate agents should be aware of the potential legal issues that may lurk in their profession and be duly prepared for them, should they arise. With that understanding, let's explore the most common real estate legal issues a broker may face in his or her practice.

1. Breach of Security of Collected Data

Collecting personal data from a client requires you to secure that data so that it doesn't fall into the wrong hands. Realtor Magazine makes mention of forty-seven (47) states having laws on their books regarding the security of data in order to protect consumers. In the mass communication age of the Internet, this is a major concern, as there is always the threat of accounts becoming hacked and data leaked into the public sphere. The only way to deal with this threat is constant vigilance and keeping at the forefront of data security in terms of hardware and software.

2. Simple or Gross Negligence

Contracts have built into them a clause for "reasonable care" of the other party. In cases where this reasonable care is ignored or skirted, that's when negligence becomes a reality. According to HG.org, the difference between simple and gross negligence is the point at which the broker willfully ignores or disregards knowledge while knowing that harm is likely to happen. Negligence and fraud are distinct issues, mainly because with negligence, there is no necessity for the client to show that the error was intended. Fraud happens when misrepresentation occurs with the intention of making financial gain from it. A good example of this is the falsification of taxes and other documents related to a property.

3. Breach of Contract

The legal document covering the sale and purchasing of a property is the contract itself. This contract outlines stipulations that the buyer, seller, and agent must follow in order for the sale to be successful and that each party has their due at the end of the transaction. The client has a right to expect certain actions from his or her agent, especially if they are a private LLC, and if these fail to materialize, the client may consider that he or she has been wronged and that the agent or broker did not seek to perform in the client's best interests. Usually breach of contract goes hand-in-hand with an additional charge such as negligence or fraud (see above).

4. Breach of Duty

The basic understanding a client contracting a real estate broker has is that this broker will seek to act in their best interests, without them being present. This is a major trust to be placing in an individual and as such, the broker is honor-bound to treat the sale of the property as if they were selling a property that they own. Breach of this duty, either via negligence or a failure to disclose information to the client, can lead to legal action being taken against the broker.

5. Misrepresentation

By and large, the cause of most suits that a broker will have to bear falls under this grouping. In order to make a sale, a broker may go to extreme lengths and at times those lengths may prove to be bordering on (or crossing over to) dishonesty. Brokers are held to a certain degree of honesty and it's because of this that they build their reputation. Misrepresentation can happen even without a broker intending it to, and as such brokers should seek to make sure the information they represent is unambiguous and concise, so as to make it harder to misunderstand what is being said.

A Legal Minefield

Brokers will encounter these situations regarding their contracts over the course of their profession. There will always be clients that think that they have been wronged or that they could or should have gotten more for the sale of a particular property and lay the blame squarely on the shoulders of the broker. To avoid this, it is crucial to keep in mind what a broker is expected to do. In this business, one's reputation is the most valuable commodity one has. Care must be taken to maintain it.

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