Cost of a Claim

Based upon the cost of litigation, as compared to the amount typically in dispute, approximately 90% to 95% of all claims against real estate brokers and agents settle without going to trial or binding arbitration.  Unfortunately, the settlement of most claims involves some payment to the claimant, along with some attorney fees and costs.  Often the amount paid in attorney fees and to the claimant consumes a good portion, and potentially all of the broker and agents’ insurance deductible.

What can be deduced from the foregoing?  The real cost and hardship from a claim lies in the fact you are being sued.  The issue of whether you have done anything wrong is rarely decided.  That is not to say the degree of culpability of an agent does not enter into the equation.  It does and will affect both the amount paid in settlement, as well as the likely cost for legal fees.  It is to say, however, that if you are sued, then you have for all intense and purposes lost, regardless of how you handled the transaction.

With this in mind, the most important thing you can do to keep your insurance, claims and legal costs down is to do whatever you can to avoid the claim altogether.  That, in turn, means you want to be sure you carefully navigate your clients and the transaction around any possible issue which could give rise to a claim.

Some feel by shifting the blame to another party in the transaction, they have protected themselves.  The sad truth is that if there is a claim, not only will you be invited, but you will be given a seat at the head table.  Claimants see real estate brokers as deep pockets and most attorneys for claimants prefer to fish with a net (bringing in all possible parties).

In addition, if you even sniff a problem, you should be as proactive as you can to deal with it before the claim is filed.  The only real win in these situations is avoiding the claim from the inception.

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