Wednesday, August 12, 2009

Realtor Liability: What do you do to protect yourself and your clients?

How well have you really considered the liability you're exposed to in your business?

Do you know someone that's been sued, settled out of court or compensated someone else to avoid legal action, lawyer expenses and negative publicity? Have you encountered a situation that made you think, "That could've been me" or "that situation could have gone really bad?"

How often have these situations involved hidden surprises in the condition of a home, inaccurate or misunderstood disclosure or even a client's false expectations in their purchase?

Adding to the potential risk of liability is the fact that the State of Colorado and Federal Government does not regulate or control home inspectors or home inspections. In Colorado there is no governing set standard of practice. There are no governmental requirements for basic skills, training or proof of competency. No insurance requirements. There are no background checks on individuals that are literally given the keys to people's homes.

So, how closely have you looked into the liability risks of Home Inspections? What does this mean for a Realtor? What about liability to a home buyer or a home seller, your clients? Do home inspections potentially increase or decrease their liability in the transaction? Are there practical ways to minimize you and your clients' risk?

Although professional home inspection training emphasizes reporting techniques and language designed to minimize liability, significant liability risks still exist. This is where errors and omission (E&O) insurance can help offset the risk to all parties involved, not just the inspector.

E&O insurance not only protect the consumer from human and gross errors in an inspection, most policies carry a rider to indemnify the referring Realtor.
So why wouldn't a Realtor only refer professional home inspectors and insist that the inspectors also have E&O insurance? As a Realtor, do you? How many Realtors do you know that at a minimum only refer professional home inspectors carrying E&O insurance?

There can't be too many, as it has been informally estimated that only around 10% of the national home inspectors carry E&O insurance. This percentage is consistent with what I'm aware of among home inspectors operating in Northern Colorado.

Working with a professional home inspector that carries E&O insurance seems like an easy, responsible and prudent practice to protect yourself and your clients.

- Jon Rudolph
I.D. Property Inspections, Inc.

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