Managing Risk Saves Realtors


The practice of real estate is a very legalistic business and we take our jobs far too lightly. I think one of the reasons is because we haven’t had a transaction that ended up in litigation. In all my Risk Management CE classes, I use this illustration; “When you driving down the road and you’re speeding, then you look in your rear view mirror and see a blue light flashing, it’s too late to be concerned about how fast you were going.” The damage is done. You knew the speed limit, and you knew if you were caught speeding, you would suffer the consequences. The same thing is true in real estate.

As licensed real estate agents we are supposed to know the law. When we are licensed we set ourselves apart as professionals in the real estate industry. That license signifies to the consumer that you have been educated, passed extreme examinations, properly trained, and that you are qualified to assist anyone when buying or selling real estate. The consumer should but seldom does, interview an agent before employing them to find out if they have sufficient expertise to represent their best interest.

When a real estate agent looks in the mirror, they should see an invisible phrase branded on their forehead that says, “Manage my Risk today.” Sometimes Realtors® get so caught up doing their daily performances they lose track of the risks they are taking. They don’t recognize their need for continuing education until they experience legal issues but then it’s too late to manage the risks on that transaction. They just have to guard against it on the next transaction.

Managing risk is all about taking precautionary measures before a problem occurs, to make sure that the problem never comes up. If we know the laws, rules, regulations, and company policies, and live by our Code of Ethics, preventing a potential problem is fairly simple. I use the medical profession as an example in my classes. A doctor graduates from medical school and is licensed to practice medicine by the state. At that point they have sufficient education that provides a medical background, but they are just now ready to start learning how to become a good doctor. They learn from their successes of good decisions, and they learn from their mistakes. They constantly read case studies of various diseases, symptoms, cures, drugs and etc. The longer they are in the business, the more continuing education they need so they can learn the latest techniques and medicines available that are productive in curing ailments.

I don’t put a lot of confidence in every home inspection I see because that home inspection is performed by someone I may not know; that is I don’t know their background, their past performances or the knowledge they possess. However, I almost mandate that a potential buyer have a home inspection done. Home warranties are the same way. I strongly encourage every seller to purchase a home warranty; not for covering repair cost, but to transfer the liability from the owner to the company providing the home warranty. These two inspections will greatly reduce my client’s risks as well as reduce my broker’s risks.

I thoroughly believe that an ounce of prevention is worth a pound of cure. Real estate education and real estate training is the best way to stay abreast of changes and to be reminded of ethical procedures when representing the public that is buying or selling real estate. Education and training is a business expense that is an allowable deduction by the state and by the IRS. Therefore it cost you nothing, but benefits you greatly. So protect yourself and your clients by managing your risks.

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to  and view previous articles.