E&O Risk Manager: Agent Makes Costly Error in Purchase Agreement

A Real-Life Situation on the Importance of Attention to Detail


pearl-insurance-logoA real estate agent listed a residential property that included a large-screened gazebo equipped with electricity, a mini-fridge, and a 50-inch television. The owners agreed to sell the gazebo to their next-door neighbor in a separate, private sale. The proceeds from both sales were to be used, in part, to fund their retirement as they transitioned from a large home in the country to an apartment in the city. Fortunately, the agent was able to find a buyer for the home, which closed escrow approximately 60 days after the execution of the purchase and sale agreement.


The buyers of the home were unaware that the gazebo was not part of the transaction.


Despite being told of the owners’ intentions, the agent failed to specify in the purchase and sale agreement that the gazebo was not subject to the real estate transaction.


When the buyer arrived to move into his new home, he discovered that not only was the gazebo missing, but it was sitting in the neighbor’s backyard. The buyer immediately contacted the agent who, after glancing at the marketing material and the sales contract, quickly realized that she made an error. While deciding how to best respond, the buyer hired a lawyer who wrote a letter demanding the sellers and agent replace the gazebo with a new one. A letter was also sent to the neighbor, alleging trespassing and conversion, since it was determined the gazebo was moved the day after the closing. With clear evidence against the agent, the real estate company agreed to settle the matter by purchasing a new gazebo and adding an additional amount to resolve the claim against the neighbor.


Continually attending seminars and other educational sessions for real estate professionals can be highly beneficial for both brokers and agents—even if a topic has been previously covered. Many errors and omissions take place even when certain practices are routinely performed. Reviewing property notes and documents with a manager or peer agent can help prevent problems before they are created.

The recommendations in this article may differ from state and local practices. Greenwich Insurance Company and Indian Harbor Insurance Company Coverage is not available in all jurisdictions.

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