Top Causes Of Lawsuits In Real Estate

Top Causes Of Lawsuits In Real Estate

Top Causes Of Lawsuits In Real Estate. The probability of being sued as a real estate agent is very high and at times, it could be for a very minor reason. But your clients do not care. Because they believe you are an expert in the field, you should know better. You see, real estate investment involves a lot of money – sometimes, an investor’s life savings. This is why you need to be very careful while carrying out a real estate transaction.

This also includes a documentation process. Whatever is not clear to you on any document, make sure the attention of the other parties is drawn to it, to prevent future problems which could result in being sued.

So if you are new to real estate or you have the intention of becoming a realtor in the future, you need to equip yourself with the knowledge of how the industry works, to prevent you from being sued. This is very important…

Because lawsuits in the real estate sector create monetary risks because if you lose, you might be required to make monetary compensation to your client. And this payment is beside the fees you will …

Pay your lawyers who took your case and other related costs. And worst of all, you might be required to offset the other party’s legal fees.

The good news is, there are guidelines to prevent you from lawsuits and we will be talking about these guidelines in this article.

But first, let’s start by looking at 5  common causes of lawsuits in real estate.


  1. Breach of contracts

The majority of lawsuits in real estate are a result of a breach of contract. This is because many deals are conducted based on poorly drafted contracts.

What is a contract?

A contract is a legal agreement binding two or more parties. So it should be carefully drafted and reviewed by an attorney.

A good contract is a result of careful drafting, long experience, and review by a qualified attorney.

Some people use contracts straight from the internet because they feel it is the same as hiring a legal practitioner to draft one.  Listen, Using contracts straight out of the internet without careful modification is like bringing a knife to a gunfight. To be safe, get an experienced lawyer to draft your contract or guide you through the process.

  • Failing to disclose a property defect

Another problem real estate professionals face that leads to a lawsuit by their clients is failing to disclose property defects.

This is a very bad practice by some dubious real estate agents. Although some may not be aware of the property deficit, however, some are but they choose not to let the buyer know about it because it could reduce the price of the property or turn the buyer off and they may end up losing the sale.

Listen, as a real estate agent, your job is to have the interest of your clients( buyers) at heart. This means getting them a good property. And to do that, tell them all there is to know about the property, don’t be scared that they might not buy.

Yes finding out the property defect may cause them not to buy that particular one, but trust me, it will increase the trust they have for you. And you know what that means?

They will be confident to do more business with you and may even buy that same property. You never know.

  • Mishandling your client’s sensitive data in this modern era where the world is facing security threats from hackers, it is very important for real estate professionals to handle their client’s transaction details with care so it doesn’t fall into the wrong hands.

Hackers are aware that real estate consultants move a lot of money, so they are often targeted. So be sure you have a secured system, personally identifiable information is encrypted properly.

Also, ensure your office is secured to prevent official documents from entering the wrong hand.

  • Misleading clients.

As a real estate agent, one thing you should never joke about is your reputation. You see, as an agent, your reputation is very important because most clients you want to work with, will be interested in knowing your previous performance.

And if they find out that you do mislead investors, they won’t want to do business with you. So try as much as you can to be transparent with your clients in your transaction. If there is any property defect, let the buyer know before closing the deal.

READ MORE: Land Documents Are Very Important

Because after closing the deal and they find out of any defect, be sure to appear in court.

  • Negligence

Negligence is another cause of lawsuits in real estate. It is the failure to exercise the care that a reasonably prudent person would exercise in like circumstances.”

For instance, If a real estate professional fails to execute a transaction with reasonable care, a client may claim negligence. Unlike fraud, negligence lacks the element of malicious intent.


How real estate agents can prepare for a lawsuit

  • Carefully choose your client:

Working with some clients can be frustrating as a real estate agent. So you want peace of mind, you have to be selective of the type of clients you want to work with. That is the first step you should take because being an agent alone is a piece of work, so you wouldn’t want to add more to it. So avoid clients that quickly get irritated, or never seem satisfied with whatever you tell them, or who outrightly question your professional advice and competence.


Also, avoid those with clear anger management issues. These are red flags. You should be wary of this type of client because they can cause problems for you.


  • Recommend inspections and thoroughly document any property defects.

As an agent, you’re a Messiah to your clients. They believe and trust you to solve their buying problems and be transparent at the same time. The best way to do that is to be professional and as a professional realtor, you should always invite your clients for inspection.


This way they get to see what they are spending their hard-earned money on before closing the deal. During the inspection, make sure to show the client every part of the property, let them know of any defects, etc. If he/is satisfied, then you proceed to the next step.


Also, you should thoroughly go through every document, if something is not clear, point it out and make sure everything is well understood. Because in real estate, documents are very important – they show that you are the legal owner.


So a minor mistake can cause you a lot of money. So you have to be extremely careful. You should also review the documents with your clients. State everything for them to hear and understand before proceeding to close the deal.


  • Recommend your clients bring their surveyor to get a survey.

Always recommend your clients come with their own surveyor when they ask for a survey. This not only builds trust, it also means they will have to pay for it, but at least they will have more control over when the information is delivered and better guidance on how to interpret the results from their surveyor.


In real estate, it’s important you try as much as possible to avoid a lawsuit. Because not only does it create monetary risk if you lose, it also affects your reputation. And that’s not good for business.

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