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REALTOR® Emeritus |  | Risk management Minimizing Liability From Contracts | | ||
|  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 | Advanced Tip: How to Breach a Listing Agreement Without Even Trying Oliver Frascona, a real estate attorney in Boulder, Colo., and author of The Paper Trail (Real Estate Law Books, Inc.), shares these tips for avoiding contract breaches. Q: What are the main forms of contract breach in real estate? Frascona: In real estate, contract breaches can occur in the property listing agreement between the broker and the seller or in the sales contract between the buyer and the seller. Q: How might a broker breach a listing agreement? Frascona: A broker or sales associate could violate a listing agreement by failing to advertise a property as agreed. By keeping a listing in-house, even for a short while, instead of placing it with the MLS or refusing to work with a cooperating agent, a broker isn't fulfilling the fiduciary responsibility to the seller. This is the most common breach of a listing agreement. Another typical breach occurs when a listing agent discloses confidential information about the seller—a divorce, financial problems, and the like. It may be unintentional, arising from a simple conversation between two sales associates, but it is still a breach of fiduciary duty because it benefits the buyer and creates an undisclosed dual agency. Even delaying the presentation of an offer could breach a broker's fiduciary duty under the listing agreement. Q: What about seller breaches in the listing agreement? Frascona: The most common breach on the seller's side is misrepresenting the facts about the property to the broker. A seller could also violate the listing agreement by interfering with the broker's ability to show the property or refusing to pay the broker's earned commission. Q: Are brokers liable for the breaches of their sales associates? Frascona: Yes. The activities of a sales associate are attributable to the broker or owner. There is a huge downside risk to breaching one's fiduciary duty, even if it was unintentional and even if no damage was done to the seller. The minimum penalty is loss of full commission. Some companies have had to pay multimillion-dollar penalties. Make sure your people understand their fiduciary duties under the listing agreement. Confusing Contract Verbiage These are words that can easily infer something that the parties didn't really intend. When you see one in a contract, stop and read it carefully to be sure that the word correctly expresses the intent. · As is · Approve · Best · Certify · Ensure · Inspect · Never · Required · Timely Adapted from Reduce Your Risks to Professional Liability Claims in Real Estate, Leland M. Kraft, Jr., Apollo Publications, 1991 How to Handle Escrow Funds Safely Escrow fund mishandling is a common violation of state real estate license laws, according to real estate commissions in states with large numbers of practitioners. Jeff Jefferson, chief financial examiner at the Colorado Division of Real Estate, offers these suggestions for avoiding liability as a result of improper handling of escrow funds.
TIP: For added protection, be sure those handling escrow funds are licensed or bonded.
Fair Housing Risks > | Keep It Ethical Avoid commingling of client and personal monies by establishing a separate account for escrow funds. (Article 8 ) |