Common Real Estate Agent Lawsuits to Avoid

Lawsuits are part of a real estate agent’s professional life. They either break or make a realtor. However, you shouldn’t see these common lawsuits as a deterrent to success.

Lawsuits Against Real Estate Agents

Instead, use them to know how to prepare and protect yourself against these lawsuits. Here are some of the common real estate agent lawsuits issues you can encounter.

Failure to Advise and Identify

A real estate agent’s primary obligation is to gather the seller’s necessary details on the property and provide these to the buyer. When we say advice, it should be related to real estate. A home inspection is a great way to avoid this kind of lawsuit in the future.

Take the time to let potential buyers see the property in person. During the inspection, walk through the buyer with the property’s details. Be honest about any hidden defects that aren’t identified at first.

We know closing a real estate deal is complicated. But, lawsuits are far more difficult and more expensive. They can drain you financially and emotionally.

Breach of Contract

Real estate transactions can get complicated if you don’t have a professionally written contract. This contract has to include all the terms and conditions regarding the sale.

The contract enumerates the following details:

  • Seller assistance indicates that the seller absorbs part of the buyer’s added costs.
  • A clause on closing costs identifies who will pay for these.
  • Home inspection contingency
  • Inclusions on the selling price (Are the appliances included or not?)
  • Closing dates

Real estate agents have to make sure these details are correctly identified. Otherwise, the buyer or seller may sue you for breach of contract.

The important thing is to avoid any assumption. You must write everything in black and white because verbal agreements don’t have a place in the real estate industry.

Yes, contract creation is an added task, but it protects you against breach of contract lawsuits. Besides, having a clear and detailed contract will make a real estate transaction hassle-free.

Negligence Lawsuit

Negligence happens when you don’t perform due diligence in informing your clients. It also occurs when you fail to do a home inspection before the buyer signs the closing documents.

Even if you’re acting in good faith, the client assumes you know these property issues. Often, clients can sue you for fraud on top of being negligent.

So, to avoid these kinds of lawsuits, adopt a systematic process, and be keen on every detail. Perform your duties as a real estate agent.

If you have to tell your client that the property has foundational issues and pests, do it. It’s better to lose a client by being honest than to close a deal that gets you sued for negligence because you kept a critical detail a secret.

Failure to Disclose Lawsuit

Disclosure of defects is the primary responsibility of the property seller and real estate agents. Still, many real estate agents face lawsuits because buyers find out about all property defects. Why? Because of the assessment procedure.

Real estate agents assess the property. During the assessment, one of your responsibilities is to ensure that the property is in pristine condition.

Buyers assume that real estate agents are experts when it comes to assessing properties. Thus, ask as many questions as you need. Inspect as thoroughly as you want.

If you find a defect during the assessment, no matter how negligible, ask the seller to disclose it in the listing agreement. Alternatively, you can disclose these property defects and selling limitations if the seller doesn’t want to.

Although failure to disclose a lawsuit is hard to prove in court, you still don’t want to undergo the hassle. Besides, any lawsuit against you and your real estate company can negatively impact your reputation.

Legal Advice Lawsuit

Since you’re the primary point of communication, buyers and sellers often ask you about legal advice. Some real estate agents make a mistake and offer pieces of legal advice to their clients, which is ill-advised.

Leave the lawyers’ legalities out of it because your job is a real estate agent, not a legal advisor. You should tell your client to ask their lawyers about legalities, even if you have basic knowledge about real estate law. Stick to real estate information, and you will be doing an excellent service to your business and your client.


Most of the time, preparation and familiarizing yourself on these lawsuits isn’t enough to protect adequately yourself. You can get sued once or twice during your real estate professional life. It would help if you had an LA Real Estate Insurance. Insurance involves additional costs, but the benefits outweigh them, especially if you think you’re prone to legal risks.

If you need to know more about insurance on real estate, feel free to contact us. We have experts who can discuss the details with you.

About Arroyo Insurance Services

Arroyo Insurance Services was officially established in 1986, but we have roots dating back to before 1950. One of California’s leading client-oriented and independently owned agencies, we have over 140 employees with a combined experience of over 450 years, spread across 11 locations. We are committed to providing the best insurance and risk management services at the most competitive premiums, and backing it with hands-on service tailored to our customers’ needs. For more information on how we can mitigate your risks, contact us today at (877) 220-4769.