Washington's Best Real Estate EducationOnline Clock Hours for Washington Brokers
Risk Awareness – Course Syllabus
The consumer of today is better educated and more willing to litigate than in the past, largely due to access to information on the internet. This creates a legally complicated and risky environment for real estate professionals. The intention of this course is to teach real estate licensees how to recognize, evaluate and manage risk.
Benefits to Consumer
The benefit to the consumer when a licensee has successfully completed this course is that the agent will have new knowledge of the importance and effects of proper documentation as well as being able to avoid acts that could be considered misrepresentation. The licensee will be able to avoid the elements of fraudulent, negligent and innocent misrepresentation while protecting the customer or client.
Upon completion of the course the student will be able to:
|Occupational risk of real estate||Outline and discuss risks specific to the business of real estate|
|Risk and responsibility||List the common areas of risk in a real estate practice|
|Policies to mitigate risk||Explain the importance and effects of proper documentation|
|Avoiding misrepresentation||Discuss the elements of fraudulent, negligent and innocent misrepresentation|
|Negligence||Describe acts that could be considered negligence|
|Disclosure laws and responsibilities||Relate the disclosure obligations a licensee owes to sellers, buyers, non-clients, and to other licensees|
|Legal issues||Summarize the top legal issues real estate licensees face dealing with disclosure|
|Managing fraud||Discuss the components of mortgage fraud|
|Short sales||Explain the potential liabilities a licensee may face when counseling homeowners regarding short sales.|
|Antitrust issues||Describe possible anti-trust issues|
|Unauthorized practice of law / disputes||Identify potential ways to avoid the risk of unauthorized practice of law and methods of mitigating disputes|
Sample of course content
Professionalism = Risk
A professional, by virtue of assuming this obligation, is going to inherit risk. The challenge is recognizing the risk, how much risk one wants to take, and how to manage that risk. Real estate professionals have specialized knowledge. Today, that is what an agent has to sell. They have training, education, and experience.
Real estate professionals have a duty to provide clients with sufficient information within their expertise so the client can make an informed decision. This also places a burden on the client to use reasonable care and diligence. Because the advice is coming from an expert, the client can reasonably rely on it, which places a burden on the expert to provide a high level of expertise and care.
Real estate professionals, as experts, cannot recklessly give out information or advice and expect the client not to rely on it. The client is going to pay for the advice, allowing the client a reasonable expectation of a certain level of expertise. You’ve heard the old adage: “I’ll give you my opinion; it’s worth exactly what you are paying for it.”
The client needs to know and understand the services being provided and, more importantly, what is NOT being provided. This is where real estate professionals often find themselves getting into trouble. There may be an unreasonable expectation placed on what it is that real estate professionals do. It is important that clients understand the broker’s role and duties so they have reasonable expectations. All of that creates risk. Therefore, it is important that the broker understand the degree of risk associated with the services provided and how to manage it effectively.
There is risk management and there is risk avoidance. Writing exculpatory clauses that say: “I don’t do this and I’m not responsible for that, and I’m not a professional in this and that.” That is risk avoidance. You can avoid all of the risk by simply shifting it to your client. Then the question is: “If you are doing that, are you a professional? “
If you are going to charge clients for expert advice and a high level of service, you need to recognize that you are assuming risk. Real estate professionals assume risk, but they are going to manage it properly. This entails demonstrating that, should anything ever go wrong, you are able to prove that what you did fell within the standard of care for the profession; that is what you had a contract with the client to do.
This then leads us to consider what the consumer expects. If they don’t have a clear understanding of what it is a licensee is doing, their expectations may be unreasonable. Real estate professionals must talk to their clients; it is important that the client understands what is and is not being provided. It must be worth the money. If consumers understand the broker’s services, qualifications, and experience, they can make an informed decision and they are less likely to argue with the fee once they have hired a professional.
Most of the complaints filed with state real estate regulatory agencies originated from situations in which the client’s expectations were not met. In many states, approximately 5% of the complaints that the regulatory agency receives are concerning “bad actors.” The rest involve licensees failing to exercise good risk management or the client’s expectations were unmet. If the consumer does not understand what services are being provided, and if the broker has not articulated this, expectations have a good chance of being unrealistic, this leads to frustration.