Broker Referral to Vendors

Type of Case:  Broker Referral to Vendors
Issue:  Can a Broker incur liability for negligent referral?
Answer:  Yes

Facts:  Real Estate Broker was requested by Client for the name of a Korean speaking Loan Officer who could assist in refinancing her home. Broker provided three names one of whom was known in the community as a Loan Officer with a successful track record. Actually, the "Loan Officer" was not licensed and was working as a referral source to a Los Angeles Loan Broker. He persuaded the client to give him $350,000 as a down payment for a refinance then embezzled the funds.

Results:  The matter is pending and while settlement appears imminent it has been a costly lesson for the Broker.

Lesson:  Always verify licenses of any Vender to whom you refer a Client and ask for references before providing referrals. In addition, it is always very smart to confirm the Vendor has errors and omissions insurance. In the case of a problem, the Claimant will seek targets with assets. If the Vendor to whom you refer your Client does not have assets (such as an errors and omissions policy) then the Client will likely seek recovery from the referring Agent. On the other hand, if the Vendor does have insurance, the referring Agent is less likely to be a target. In addition, the fact the Vendor has such insurance is a good indication of that Vendor's professionalism.


The following does not create an attorney-client relationship between the viewer and CRELA, Shannon B. Jones Law Group or Spile, Leff & Goor and the viewer may not use anything contained in or omitted from as the basis for any claim of any nature against CRELA, Shannon B. Jones Law Group or Spile, Leff & Goor.

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