Top 7 Claims against Real Estate Agents

Real estate agents and brokers must adhere to various codes of conducts, as well as professional rules. As such, these professionals are frequently the subject of many different types of lawsuits and legal claims.

The top 7 claims against real estate agents are:

1. Real Estate Fraud: Real estate fraud occurs when one person involved in a real estate transaction makes false representations of relevant information to another person who is involved in the transaction. Alternatively, one person may fail to disclose relevant information to the other, who then acts on the false information or omission to their financial detriment. Fraud in real estate transactions can occur during any phase of a real estate transaction, from the mortgage application or approval phase through to the closing of a sale or purchase of a piece of real property. It is important to note that prospective renters can also be the victims of real estate fraud. Real estate fraud cases can arise from any kind of transactions which involve the buying, selling, renting, and/or renovation of real property.
   • An example of this would be how some perpetrators engage in fraudulently selling a house. Another example would be how a seller can make false statements to a buyer regarding a property that they are selling. Or, a seller can fail to inform a prospective buyer of an important fact regarding the condition of the property that they are selling, in order to make the sale;
2. Breach Of Duties: A fiduciary is a person who is entrusted with acting on behalf of another person, and making decisions that are in the best interest of the person that they are representing. Lawyers, accountants, and financial advisors are examples of who could have a fiduciary duty to their clients. Additionally, real estate agents owe a fiduciary duty to their clients, the most important aspect of which would be the need to operate honestly and in the best interest of the client. While representing a buyer or seller in a real estate transaction, the real estate agent will spend the majority of their time working independently of the client.
   • An example of this would be how they negotiate with other parties, coordinate inspections, and prepare contract documents. Generally speaking, when a real estate agent decides to act for their own personal benefit to the detriment of their client, they have breached the fiduciary duty that they owe to their client;
3. Contract Violations: A real estate contract is a document that contains the many terms and conditions of a real estate transaction, which are integral to a contract for the sale or purchase of real estate. According to real estate contract laws, a breach of a real estate contract occurs when one party to the contract fails to perform any number of the contract terms that they agreed to by signing the contract. Because these types of contracts involve the transfer of real property, they are required to be both written and signed in order to comply with the Statute of Frauds;
4. Negligence: In short, this is associated with failing to use reasonable care when conducting transactions. Essentially, due care refers to what a reasonable or prudent person would do under the same circumstances. In terms of real estate law and transactions, this would be what a fellow real estate agent would have done under similar circumstances. As such, a client may claim that their real estate agent knew or should have known something, but failed to take any action in order to prevent or address it;
5. Damage To Property: An example of this would be damage that occurs during an appraisal, or when inspecting a home. In order to hold a person for negligence resulting in property damage, it is generally necessary to prove that the person owed a duty of care to the other party, and that they disregarded that duty. Additionally, these acts must result in damage to the property that can be quantified;
6. Misrepresenting Property Conditions, Damage, or Value: It is important to note that the seller or buyer is ultimately responsible for disclosing any property defects that are involved in a real estate sale. However, real estate agents also have a responsibility to disclose anything that materially affects the property. What this means is that they must disclose relevant facts when the value or desirability of the property is negatively impacted; and
7. Disputes Associated With Escrow And Down Payments: Escrow is an arrangement made with a third party, who is uninvolved with the buying and selling of a home; meaning, they are neither the buyer nor the seller. In real estate transactions, escrow holds all funds that are associated with the transfer of title, as well as maintains all documents and contracts.
   • Escrow is important in real estate transactions because it ensures that a neutral third-party handles the documents and finances that are associated with the transaction. In doing so, this helps make the transaction safer by ensuring that both the buyer and seller meet their obligations as stated in the contract. Additionally, the escrow process ensures that finances are not exchanged between the buyer and seller themselves. As such, if one party fails to perform on their obligation, the other party does not automatically receive the money.

Who Can Be Held Liable For Such Violations?

Under most circumstances, a real estate agent can be held directly liable for violations, such as fraud or breach of contract. However, there are other parties that can also be held liable for various violations. An example of this would be how real estate agents often work on behalf of a broker or a brokerage company. As such, a broker or the entire company can also be involved if the agent’s supervisor authorized the violating action, or if the agent specifically acted according to fraudulent instructions.

Another example of how other parties might be liable would be if an agency relationship exists. To reiterate, an agent is someone who agrees to represent another person; the person that the agent is representing is called a principal. An agency relationship is generally formed by an agreement between the two parties.

Additionally, an agent can only act on behalf of a principal for specific issues. The principal has the right to completely control the agent’s conduct as it relates to the duties that are given to the agent by the principal.

Here, the court would need to prove the existence of such a relationship in order to determine which party should be held liable. This is because liability can often be split between multiple defendants.

Are There Any Legal Consequences?

Legal consequences for real estate issues generally involve a monetary damages award. The amount that is awarded largely depends on the type of claim involved, as well as the nature of the dispute. An example of this would be how a breach of contract may involve remedies that are specifically listed in the contract.

Some cases may also involve statutory damage limitations. Other consequences may include:

• A suspension of agency operating privileges;
• Civil fines; and/or
• Criminal consequences.

Do I Need An Attorney For Claims Against A Real Estate Agent?

Whether you are a real estate agent or need to file a claim against a real estate agent, you will need to work with an experienced and local real estate lawyer.

An attorney will be best suited to helping you understand your legal rights and options according to your state’s specific laws. Additionally, an attorney will also be able to represent you in court, as needed.