12 Tips: Easy Ways to Reduce Your Risk

By Lisa Scoble, CIC, CRM
VP of Program Business for Pearl Insurance

Controlling your Errors & Omissions should be the mission of all real estate professionals. That’s why we’ve compiled a list of 12 risk reductions techniques you can use to minimize your legal liability and maximize your earning potential.

Tip 1:

Obtain a written seller’s disclosure form or waiver. When drawing up papers for a home or property, always make sure you obtain and review the seller’s disclosure or waiver form. Be sure to verify the information contained in the report is consistent with what you know about the property and advise the seller to update the disclosure as needed after walk-throughs, inspections, etc.

Tip 2:

View the property. Before showing a home, walk the property and point out any “red flags.” Stains on the ceiling, a leaning retaining wall, uneven floors, strange musty odors, excessive visible black mold, and foundation cracks or water lines in the basement may all indicate a more serious problem. Never interpret a property’s condition, but instead suggest your clients obtain professional inspections before making or accepting an offer.

Tip 3:

Provide full disclosure (if material in nature). Make sure buyers are aware of any potential problem areas. For example, if the vacant lot next door will be developed or if a property tends to flood, this fact needs to be disclosed to the buyers in writing to help avoid any future allegations.

Tip 4:

Disclose all conflicts of interest in writing. Claims filed alleging failure to disclose broker relationship (dual agency in other states) typically have a high success rate for plaintiffs and result in sizable settlements. To avoid this type of situation, just remember the Four Ds!

  1. Decide whom you will represent
  2. Disclose this to all parties
  3. Document your decision in writing, and
  4. Do as you say.
Tip 5:

Never act outside the area of your expertise. Even if a property is new construction, provide a list of professionals for the buyers to hire to inspect the home, test for mold and/or pests, and assess the septic system and water well. If the buyers forego these inspections, document that fact in writing and obtain a waiver.

Tip 6:

Follow pre-established office procedures. Every real estate office and professional should have a set of pre-established procedures to follow during transactions. Be sure to adhere to your office’s pre-established procedures or checklist to ensure you are maintaining a well-documented file.

Tip 7:

Familiarize yourself with fair housing laws. Become familiar with and educate buyers and sellers about fair housing laws. Avoid using words and phrases in a discriminatory context in conversations and advertising. Never work with a discriminatory seller or buyer, and provide equal service to all.

Tip 8:

Review the Code of Ethics regularly. As a REALTOR®, you have agreed to abide by a strict Code of Ethics to help maintain the highest standard of integrity among real estate professionals. To find the most current Code of Ethics and Standards of Practice, visit the National Association of REALTORS® website at realtor.org.

Tip 9:

Seek assistance when you’re not sure. Don’t be afraid to say, “I don’t know” to your clients if you are not sure about something. It is better to take the time to look up the facts or ask someone who would know the answer, rather than supplying faulty information. Just remember to follow up with them and document your findings in writing.

Tip 10:

Report all claims and incidents to your insurance company promptly. If you are aware of a potential claim situation or have had a claim reported against you, you must report it to your insurance company immediately. Late reporting may jeopardize your E&O coverage!

Tip 11:

Avoid overstated adjectives. When discussing, marketing or otherwise promoting a property, avoid adjectives (such as “renovated”) that could exaggerate improvements to a property. When stating facts about the age or structure of the roof and/or property, be certain the information you are providing is accurate.

Tip 12:

Maintain a well-documented file. A well-documented file should include the date and time of all meetings, phone conversations, emails and faxes, and records of all verified information, contracts, disclosures, waivers, and closing documents with appropriate signatures. It is important to note that you should never sign anything for your clients or customers.

(WARNING: Do not destroy your file after closing. Many lawsuits are brought years after a transaction has closed.)


By implementing these simple risk reduction tips, your documents will support your story of the transaction if a claim is filed against you—and odds are, the claim will be dropped. Attorneys don’t want to fight irrefutable evidence. When transaction files are complete and contain clear, concise and accurate information, you are better protected from frivolous claims and can avoid having to pay costly attorney fees and settlements. Make it your firm’s mission to promote loss prevention awareness starting today!



Pearl Insurance is a nationally known broker, marketer, and administrator specializing in the design and administration of quality insurance plans for associations, affinity groups, and large firms. In addition to providing real estate professionals with quality products and services since 1979, their partnerships with XL Insurance (through Indian Harbor Insurance and Greenwich Insurance Company) solidify their strength, allowing them to offer association members an A rated E&O program. Pearl Insurance has been the endorsed E&O provider of the Oklahoma Association of REALTORS® since 2012. For more information about Pearl Insurance’s sponsored E&O program, call Emily Laposha, OAR’s Pearl Insurance Representative, at 800.447.4982.

Information provided within this article is not to be taken as legal advice and is to be used for educational purposes only.