Regulatory board complaints against real estate professionals are growing at an unprecedented rate. Board complaints are easy and inexpensive to file, making it an ideal option for consumers who don’t want to bother with costly legal proceedings.
Complaints can arise over anything from misrepresentations and nondisclosures to advertising issues and contract disputes. With heightened oversight from state regulators, even the most diligent licensees are finding themselves under intense scrutiny.
In this blog, we explore the factors fueling this trend and provide strategies to help you prevent problems in your real estate business.
The Rise in Regulatory Board Complaints
Over the past few years at CRES, we have seen a notable increase in the number of regulatory board complaints. These complaints have a low financial barrier and can be filed quickly through a phone call, email, or online form, making them attractive even for minor grievances.
Common reasons behind board complaints include:
Misrepresentation
Miscommunication or inaccuracies in property details can prompt a complaint even when no fraudulent intent is present.
Failure to Disclose
Overlooking necessary disclosures can quickly lead to allegations of negligence.
Dual Agency Situations
Dual agency is where a licensee represents both the buyer and seller, which can blur the lines of responsibility and trust, especially if undisclosed to all the parties involved.
Advertising Violations
Inaccurate or misleading marketing materials remain a persistent trigger for consumer complaints. For example, inaccurate or manipulated property photos (like from virtual staging) or incorrect descriptions.
Contract Disputes
Disagreements over contractual terms or their execution often result in formal complaints.
High-Pressure Sales Tactics
Some real estate licensees use aggressive sales tactics and marketing strategies that can push clients into decisions they may later regret. This approach is never recommended and can lead to regretful buyers or sellers who decide to complain afterwards.
Even well-intentioned licensees, who strive to follow industry best practices, can find themselves embroiled in a complaint simply because of a miscommunication or a minor oversight.
Why Board Complaints are a Threat
Regulatory board complaints may not seem as daunting as a full-blown lawsuit, but even a baseless complaint can trigger a lengthy and intrusive investigation.
Any complaints are thoroughly investigated by your regulatory board which can be a time-consuming and challenging process. Defending yourself against these complaints can pull your focus away from your core business activities, having a severe impact on your business operations.
The mere act of being under investigation can tarnish your reputation and affect your ability to attract and keep your clients.
Unresolved complaints may lead to significant financial consequences. They can result in fines, penalties, and even license suspensions. Such outcomes can severely damage both your real estate business and your career.
Strategies to Protect Your Real Estate Business
Communicate, Communicate, Communicate!
Many ethics complaints result from misunderstanding or a failure in communication. Encourage clear and transparent communication with your clients so they approach you directly with concerns, before complaining to your regulatory board.
Document Everything
Maintain detailed records of all interactions, including emails, phone calls, and meeting notes, to provide evidence of compliance and resolve any disputes effectively.
Know Your Code of Ethics and State Regulations
Regularly refresh your knowledge of the NAR code of ethics, your local real estate association’s or Board of Realtors® code of ethics, as well as your state real estate commission’s regulations to ensure that your practices remain compliant with industry standards.
Speak with a Real Estate Attorney
If you have any doubts or face complex situations, seek advice from a real estate attorney to clarify your responsibilities and protect your interests. (All CRES Real Estate Errors and Omissions members have access to pre-claim legal help.)
How Real Estate E&O Insurance Can Help
Not all E&O policies are created equal, and many standard policies offer limited protection when it comes to regulatory board complaints. These coverage gaps can expose you to significant legal expenses in the future.
To ensure you’re protected, seek real estate E&O with comprehensive coverage. See our Ultimate Guide to Understanding Real Estate Errors and Omissions Insurance to learn more.
CRES Real Estate E&O plans offer a “Broad Form” endorsement, which includes $20,000 in Disciplinary Proceedings coverage (per proceeding, up to $50,000 per policy period) to cover your costs for reasonable attorneys’ fees and other necessary costs, expenses, fines or penalties. Depending on your state and whether you have an individual real estate E&O plan or a company plan, the Broad Form endorsement may be included, or it may be an affordable option.
CRES real estate E&O plans also give you access to experienced legal professionals who understand the intricacies of the real estate industry. This ensures that your case is handled effectively from start to finish.
What To Look For in Your Real Estate E&O Plan
Given the rising tide of regulatory board complaints, it’s a good idea to review your current real estate E&O coverage and ensure it meets your needs. Here are key features to check for:
Regulatory Board Complaint or Disciplinary Proceedings Coverage
Verify that your policy explicitly includes protection against regulatory board complaints (or it may be called Disciplinary Proceedings).
Legal Defense Costs
Make sure your defense costs will be covered, so you’re not left footing a massive legal bill.
Fines and Penalties
Your policy should also address any fines or penalties that might be imposed as a result of a complaint.
Industry Expertise
Work with an insurance provider that understands the specific risks associated with the real estate industry. This ensures that you’re not just getting generic coverage but a policy tailored to your unique professional challenges.
Protect Your Real Estate Business
A comprehensive real estate E&O policy provides a safety net and peace of mind, allowing you to focus on your business without the threat of a complaint derailing your operations. This means you can operate confidently, knowing your professional future is secure.
CRES Real Estate Errors and Omissions plans include extensive coverage designed specifically for the risks real estate professionals face. With a CRES E&O + ClaimPrevent® plan, you will also have access to a team of experienced real estate attorneys who can provide expert legal advice (including pre-claim). This means that if you face a regulatory board complaint or any other legal challenge, you have a dedicated team ready to help you navigate the process.
For more than 25 years, CRES has been your real estate E&O specialists. As part of one of the largest insurance brokers in the world, we have unequaled access to extensive E&O plans that other insurance brokers don’t (especially smaller brokers).
Contact the CRES team today for a confidential discussion, and we’ll customize a policy specifically for you.
