NEW YORK — Some surprises are nice. But a letter threatening legal action is about the worst kind for a real estate agent or broker.
How to avoid the consternation — and expense — of an impending lawsuit?
Three experts at Inman Connect New York offered these tips:
1. Know what the rules are. Some agents like to complain about all of the paperwork involved in a real estate transaction and the number of disclosures they have to deal with, but “a real estate agent complaining about disclosures is like a dentist complaining about teeth,” said panelist Joseph “Joe” Rand, general counsel and managing partner at Better Homes and Gardens Real Estate Rand Realty.
Joseph Rand
Learn to execute disclosures correctly, he said.
2. Disclose “exclusive knowledge.” Ross Levine, founding partner at real estate law firm Schwartz, Levine & Kaplan, told the story of a woman who bought a “beautiful” apartment she thought had three bedrooms. But the windows in two of the bedrooms were “lot line” windows, which means they were right on the border of the property.
Lo and behold, sometime later her next-door neighbors built themselves a parking garage right up against those lot line windows, and she had to board up the windows on her own dime and the rooms became “legally uninhabitable” as bedrooms. The re-sale value of a one-bedroom home with two home offices is not the same as a three-bedroom home.
Agents must disclose exclusive knowledge, such as room count, that isn’t generally available to consumers, Levine said.
3. Know your state law. A dual agency case, Horiike v. Coldwell Banker Residential Brokerage, “really put a microscope on California’s agency disclosure law,” said Katie Johnson, general counsel for the National Association of Realtors.
Agents should know what’s expected of them, she said. NAR tracks litigation nationwide and reports on that litigation quarterly. Two major topics of litigation are property condition disclosures (such as those discussed by Levine) and agency disclosures, Johnson said.
4. Keep track of emerging issues, such as wire fraud — and do your due diligence. More and more, fraudsters are hacking into agents’ email accounts and using the agent’s email address to direct clients to deposit escrow or commission funds into illegal accounts.
Katie Johnson
“The homebuyer will try to sue you [the agent],” Johnson said. “If you have some due diligence with your email practices, we’d argue you’re not liable, but you still want to avoid being involved in that,” she added.
5. Get the rights you need from photographers. Professional photographers are increasingly suing for copyright infringement, Johnson said.
An easy way to avoid that is to get the rights you need upfront and “only use [the photos] in ways that you have the rights to use them,” she said.
NAR offers sample photography licensing agreements that agents and brokers can use and edit as they wish.
Don’t just copy something you found on Google and post it on your website, advised Rand.
“It could be thousands of dollars for the infringement that you can be sued for. They [photographers] do sue, and they want their money — which they’re entitled to,” he said.
“It’s a bad day at the office when you get a notice from Getty,” he added.
And don’t forget the Digital Millennium Copyright Act.
If a photography company such as Getty gets in touch about photos on a broker’s website that the site receives through an IDX feed, a broker can use the “safe harbor” provision of the DMCA to limit their liability, as long as they meet certain requirements, according to Johnson.
