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REALTOR® Emeritus | Risk management Controlling Business Risks | | |||
|  Three Lines of Defense Against Risk Keeping Risks Under Control Controlling Transaction Risks Agency Disclosure Avoiding Antitrust Risks Minimizing Liability from Contracts Fair Housing Risks Controlling Personnel Risks Communications Policies to Minimize Risks Insuring Against Risks More Resources: Controlling Business Risks Code of Ethics: Controlling Business Risks | Risk is a part of life, whether you're crossing a street or taking a plunge in speculative housing development. Risk connected with real estate transactions and brokerage business operations can't be totally avoided, but it can be controlled through sound risk-management policies. 3 Lines of Defense Against Risk—The Next Level Real estate brokers and owners regularly face business risks in many key areas, including agency and other transaction risks, fair housing risks, and personnel risks. They can take an aggressive role in reducing their exposures to these risks by anticipating them, controlling them, and shifting them to others, says Mary Frances Mullan, a program manager for Capital Professional Insurance Managers Inc. in the article “Starting Block” for Illinois REALTOR®, Illinois Association of REALTORS®, May 1998. 6 Ways to Avoid Risks It’s impossible to completely avoid all risks, but anticipating likely areas of risk and exercising some simple precautions to avoid them can do a lot. 1. Adopt written policies and procedures that spell out your company's agency policies, competitive practices, fair housing guidelines, personnel policies, communications policies, and overall commitment to legal and ethical standards of practice. 2. Establish service standards and include them in your associates’ standard marketing packages. By educating buyers and sellers about what they can expect salespeople to do, you avoid misunderstandings that can lead to disputes. 3. Know the limits of your knowledge. In a desire to provide service and keep the transaction moving, associates are often tempted to provide legal, environmental, or tax advice. Help avoid this problem by developing lists of at least three recommended sources in specialized areas that associates can recommend. —John Cyr, Joan Sobeck, and Laurel McAdams, Real Estate Brokerage: A Management Guide, 5th edition, Dearborn Financial Publishing, 1999 4. Educate salespeople about the correct preparation of sales contracts and disclosure forms as provided in your state. Take the time to review all contracts salespeople have prepared for possible errors. 5. Train salespeople and transaction management personnel on the proper way to handle escrow funds. Be certain to avoid commingling of escrow and operating funds and not to disburse any escrow monies until the transaction is closed. 6. Get regular legal and accounting advice from experts. If feasible, put an attorney and accountant on retainer to answer questions about issues as they arise. 3 Proven Risk-Shifting Strategies > | |