BAM Key Details:
- Between 2021 and 2022, there was a 9% increase in lawsuits filed against real estate professionals, according to Zach Vollmer, senior vice president of real estate at Victor Insurance Managers Inc.
- Vollmer believes more lawsuits are coming in 2023 due to decreasing home prices leaving buyers and sellers unhappy about their transactions.
There’s no denying that the past couple of years have been a whirlwind in the real estate industry. Agents—especially those working with buyers—have been working countless hours to help their clients snatch up their dream homes.
However, as home prices begin to settle down, there’s a new threat on the horizon for agents – getting sued.
That’s right, lawsuits against real estate professionals are on the rise. So, what’s behind the surge in legal action against agents? We’ve got the details below.
Lawsuits Against Real Estate Professionals
Sure, lawsuits are no stranger to those who work in the real estate industry. But in the past year, there has been a 9% increase in lawsuits being filed against agents and brokers, according to Zach Vollmer, senior vice president of real estate at Victor Insurance Managers Inc.
The primary reason? As home prices begin to settle down, buyers who made offers over the asking price, or waived contingencies, are left wondering if they made the right decision. And let’s not forget about sellers who regret not listing their properties sooner. All of this second-guessing leads to more legal action.
Vollmer told Insider it’s common to see an increase in lawsuits against real estate agents and brokers when home prices start to fall.
These cyclical increases are driven by the ‘unhappy consumer’ who is more likely to file a suit after having had a negative emotional experience during a real-estate transaction.
What should agents look out for?
According to Vollmer, the majority of lawsuits in a cooling market involve aim to activate payouts from liability insurance policies held by real estate professionals. This can include nondisclosure (if an agent or their client withholds information) or misrepresentation and negligence during the transaction.
In a market where a high number of homeowners face foreclosure, lawsuits surrounding wrongful evictions, property preservation and short-sale transactions also rise. In today’s market, however, the number of foreclosures remains historically low, so that likely won’t affect many industry professionals.
But looking ahead to the rest of the year, Vollmer expects the number of lawsuits filed to rise again in 2023.
As we head into the rest of the year and beyond, it’s clear that the real estate industry is facing some challenging times. With a predicted increase in lawsuits against agents and brokers, it’s more important than ever to stay informed, stay vigilant, and take every step to protect yourself and your clients.
Remember, doing your due diligence is key. Make sure you’re up-to-date on the latest regulations and laws, keep detailed records of every transaction, and invest in liability insurance policies that will safeguard you in the event of legal action. By being proactive and taking these steps now, you’ll be better prepared to weather whatever challenges come your way in the months and years ahead.