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Top Three Reasons Real Estate Agents Get Commission Complaints or Sued (And How To Avoid Them)

Thought I would do an article on what I think the top three reasons real estate agents get real estate commission complaints and/or sued for, and strategies to try to mitigate those issues from arising. The last part is on when I think a real estate agent should contact an attorney if they believe that they may be facing a bar complaint or law suit. Let’s get into it!

1. Failure To Disclose Defects After Identifying Issues With The Property

Real estate agents have a duty to advise clients of issues with the property that they see during their walkthrough or their assessment of the property. If it is later discovered that the agent did not notify their client of the issue, then they have breached a duty of loyalty to their client.

The solution to avoid this issue is to keep a keen eye open when visiting properties yourself. If you see something wrong or if something even feels off, make a note of it and alert your client. Also, you’re not a property inspector so be sure that your client hires one that they feel comfortable with using.

2. Missing Strict Contract Contingency Deadlines

Real estate contracts can have very strict terms and deadlines that if not abided by, can have significant “unintended” ramifications. For example, an appraisal contingency may impose a deadline for a seller to reply to a notice from a buyer that the appraised value is less than the purchase price, and if the seller doesn’t reply to the buyer within X amount of days then they have agreed to have the price automatically lowered the purchase price to the appraised value. The seller may have not intended for that to happen and will be very angry at their agent if their agent misses this deadline.

The remedy for this situation is to fully understand all contract contingencies in our contract. Not just the appraisal contingency, but the financing contingency, inspection contingencies, and so on.They can change from contract to contract so be sure to speak with your broker or an attorney if there is a term you don’t quite understand.

Another solution is to set a notification prior to the expiration date of deadlines with all of your files. As someone with hundreds of cases, it is impossible to stay on top of every case without some sort of external tracking system.

I like to keep things simple and put my reply deadlines in a simple calendar app such as Google Calendar.

3. Double Crossed By Dual Agency

This last point may not be relevant in your jurisdiction because it may not allow for dual agency, and if your State does recognize dual agency it may place limitations on it. The limitations or outright bans on dual agency is the laws ways of addressing the philosophical question of whether or not a man can serve two masters. And that is the contradiction underlying every dual agency transaction that agents and their clients need to be aware of.

Where I practice law in Maryland, the law is that a broker can appoint different agents for the buyer and the seller. So they can be represented by the same broker, but not the same agent. It’s like a halfway point between banning and allowing for dual agents.

That said, buyers and sellers have still contacted me because they felt that their agent was not advocating on their behalf. What’s scary about this is that the feeling may not align with reality. Often, neither party gets exactly what they want in a real estate deal.

The best way to avoid this is to have a conversation with your clients about dual agency and to address the elephant in the room of serving two masters. To explain the underlying issue with dual agency transactions so that your potential clients so that your client can make an informed decision that is what they want to do.

Consider Contacting A Lawyer The Moment You Are Threatened With A Real Estate Commission Complaint or Law Suit

In a perfect world (which I don’t live in), I would love it if I was contacted by real estate agents the moment that they are threatened with a real estate commission complaint or a lawsuit. This way, I can attempt to work out a solution prior to any complaints or lawsuits being filed. But even if a law suit is filed it’s possible to work out a solution prior to a hearing date. That said, someone can contact me super early and we still not be able to workout a solution and just have to prepare for a hearing or day in Court. Consider developing a relationship with an attorney licensed to practice law in your jurisdiction even before legal issues may arise. It’ll be good to have one in your corner. (Unless it’s me, I’m expensive lol).