I Forwarded It Already...

Courtesy of:
Victor Insurance Managers Inc.
Two Wisconsin Circle
Chevy Chase, MD 20815-7022
Phone: 301-961-9800
Fax: 301-951-5444

Download the PDF

The Facts

Michael Harrod, a real estate agent, assisted a couple, Mr. and Mrs. Clark, who were looking for a home that was both what they wanted and within their price range. They finally made an offer on a home – but were outbid. After months of continued searching, they ultimately made a successful bid on a home at the top of their price range.

Mr. Harrod recommended they obtain a home inspection and provided the names of several inspectors. Mr. Harrod and the Clarks were present during the inspection. Mr. Harrod witnessed the discussion between the Clarks and the home inspector regarding his findings. It turned out there were a number of items identified that needed repair, but the Clarks told Mr. Harrod they could perform the repairs themselves if necessary.

Risk Factor #1

Written evidence is critical to the defense of the actions of real estate agents. All discussions with clients regarding suspected or known property defects should be timely documented via confirming e-mails or other written communications. While it was not at issue in this case, agents should send confirming letters or e-mails providing clients with the names of several qualified inspectors to provide protection from claims alleging negligent referral, in the event the inspector does not identify a property defect that is discovered after closing.

The Clarks asked Mr. Harrod to provide them with a hard copy of the home inspection report. Mr. Harrod contacted the inspector who later sent the report to him via e-mail. Mr. Harrod then forwarded the email to the Clarks. The closing occurred without any problems.

Approximately one month after the closing, Mr. Harrod received a call from the Clarks who were angry because they claimed they never received a copy of the inspection report.

Risk Factor #2

Agents also should retain evidence of when and how clients were provided with copies of inspection reports. In this case, had Mr. Harrod simply obtained and retained a signed and dated receipt evidencing that the Clarks had been provided with a copy of the inspection report, this claim would have been defensible.

The Clarks said the roof of their home was defective and had incurred related water damage, resulting in significant repair costs. Mr. Harrod provided them with another copy of the inspection report, which indicated the roof was in need of some repairs.

The Result

The Clarks sued Mr. Harrod, seeking damages three times the purchase price of the house. They alleged Mr. Harrod breached his fiduciary duty by failing to provide them with a copy of the home inspection report and review the results with them.

Mr. Harrod was unable to produce the forwarded email containing the inspection report he sent to the Clarks. Without written evidence that a copy of the inspection report had been provided to the Clarks, it was not possible to effectively refute their allegation. The case was settled for $25,000.

Disclaimer: The purpose of this article is to provide information, rather than advice or opinion. It is accurate to the best of the author’s knowledge as of the date of the article. Accordingly, this article should not be viewed as a substitute for the guidance and recommendations of a retained professional. In addition, CNA does not endorse any coverages, systems, processes or protocols addressed herein unless they are produced or created by CNA. Any references to non-CNA Web sites are provided solely for convenience, and CNA disclaims any responsibility with respect to such Web sites. To the extent this article contains any examples, please note that they are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental. In addition, any examples are not intended to establish any standards of care, to serve as legal advice appropriate for any particular factual situations, or to provide an acknowledgement that any given factual situation is covered under any CNA insurance policy. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All CNA products and services may not be available in all states and may be subject to change without notice. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2011 CNA. All rights reserved.

These articles are not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.



Find the information, education, and connections you need to thrive in the growing field of international real estate.

Voice for Real Estate: January 6, 2020

Get takeaways from NAR's first-ever Real Estate Forecast Summit and annual conference; learn about key federal budget wins for real estate; and more.