The pandemic is causing significant changes in every business. For example, selling homes to buyers sight unseen has become a widespread practice for real estate agents. People want to move to a distant location but can’t travel to view properties because of Covid-19, so they rely on local real estate agents as their eyes as they conduct Facetime and virtual showings.
Virtual sales put a tremendous burden on agents receiving unreasonable requests from remote buyers. Even when buyers physically view a potential property, they often put unrealistic expectations on their agents to find everything wrong with the property. And now, issues with virtual showings and remote closings magnify the pressure and risk to real estate agents.
The Claim
A buyer residing in Missouri sought to purchase a house in Arizona. Because of the pandemic, she could not travel to the area where she planned to move. Instead, she found a local real estate agent to help her find a house to buy. Her agent found a place she believed was suitable for the potential buyer.
As law and standard real estate practice require, the sellers provided a Seller’s Disclosure Statement for Residential Property to the buyer. The sellers said the roof was approximately four years old. Furthermore, they claimed they were not aware of any problem with the roof or repairs needed and that it was a “new roof.” A professional inspection service hired by the sellers reported that the roof did not need any repairs. The deal was closed, with the buyer paying $650,000 to purchase the property without ever seeing it in person.
What Went Wrong
The buyers enlisted an agent to help her buy a house in Arizona, sight unseen. The buyer made the home inspection and sale remotely using her agent’s eyes and relying on the report from the buyer’s inspector. Upon visiting the home, the new owner discovered a bowing roof and sagging floors, costing $16,000 and $13,000 respectively to fix.
The fact that the former owners failed to disclose the actual condition of the roof that they knew needed repair created cascading problems for all involved. The roof over the sunporch was visibly sagging and apparent to anyone surveying it. Additionally, there were other serious structural issues with sagging flooring in part of the house and a missing stair rail. The buyer also claims the previous owners filed for a home insurance claim to repair or replace their roof four years earlier. Additionally, the buyers claim the sellers did not reveal the sagging roof in the sunroom and other problems intentionally to coax them into making an offer.
The sellers took advantage of the remote buyer knowing that they were not around to evaluate the home. But the buyer could have protected herself by hiring an independent inspection of the house. Instead, she trusted the parties involved. She is suing for $30,000 to repair the structural and safety issues. The buyer could have avoided the problems by attending the sale in person and having her inspector review it before her walk-through before the closing. With the facts, she could have canceled or renegotiated the deal with the buyer on the spot.
Agents must be cautious in their decisions to take on remote clients. Such deals are riskier because there are more ways to inherit additional liability. Remote buyers expect their agents to “be their eyes” for them and then hold their agents accountable for more complete due diligence.
Real estate professionals can’t control so many factors and conditions in the deals they help make. Nevertheless, agents are susceptible to lawsuits even when they did nothing wrong or missed something that a remote buyer does not find acceptable. Either way, a professional liability policy is better known as Errors and Omissions (E&O) policy that protects real estate professionals from potentially disastrous legal fees and settlement charges in liability lawsuits. Interested in PBI Group generating an E&O insurance quote for your real estate agency? Click here.
