Sold HomeTransactions in the real estate business involve a lot of money, and many things can go wrong. In our litigious society, getting sued in a real estate deal gone wrong is an ever present possibility. Sometimes the problems are the fault of the seller, yet the real estate agency becomes the target of the lawsuit. One reason for this is that the agency is perceived as having deep pockets that can pay off bigger claims. Another reason is that the seller may have moved to another state, which makes them a more difficult target to prosecute.

Failure to Disclose

Lawsuits frequently occur when a real estate agent fails to disclose information about a property that affects its value. This can be structural defects, plumbing leaks, sewage problems, insect or rodent pests, soil contamination, roof leakage, water seepage into the basement, mold damage and excessive environmental noise.

Even if you make every effort to disclose property information, an inspector who fails to detect a problem with the property can make it appear as though you didn't disclose. Litigation that arises from misperception will still require a costly legal defense even if the fault isn't yours.


Presenting a property in its best light from your point of view may be seen as exaggeration and even misrepresentation to your client. This can happen as a result of buyer's remorse — after moving into the home, the buyer perceives that it isn't what they thought it would be. Sometimes this issue arises because of an inaccurate appraisal that overvalues the property. This affects your description of the property to a buyer.

Unkept Promises

In order to get the sale, you may make a promise to the buyer that you later fail to keep. It doesn't matter that you had full intentions of delivering on your promise at the time it was made. Perhaps changed circumstances made the promise impossible to keep. Regardless, the buyer can still sue.

Seller Misrepresentation or Nondisclosure

A seller desperate to unload their property may misrepresent something that you fail to verify. The seller may also fail to disclose crucial information that affects the property's value. In either case, the buyer can hold you at fault.

These are just four of the many ways that real estate agents can find themselves in the middle of a lawsuit. Even the best efforts on your part will not eliminate this risk. This is why it is important to get a good error and omissions (E&O) insurance plan as a backup. E&O insurance can cover legal defense costs, as well as damage settlements to clients that arise out of a lawsuit caused by a mistake or omission made by you or a third party.

Get the coverage you need. Call Red Gorman Insurance at (214) 374-9997 for more information on Dallas business insurance.
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