Real Estate E&O Claims Spotlight: Estate Sales

Real estate agents face numerous challenges in their profession, and transactions rarely go as planned. When it comes to estate sales, especially in the wake of the COVID-19 pandemic, the challenges faced by realtors and property sellers have only increased.

When exploring an insurance claim from a recent estate sale in Virginia, the difficulties inherent in estate sales become all too clear. These difficulties can result in expensive E&O insurance claims.

The Claim

An individual working for a prominent realtor in Virginia was selected as the sales agent for a family home (the estate) located in Arlington. Between April and July 2020, the four property co-owners (the claimant and her three siblings) allege that the sales agent violated both the letter and spirit of ethics laws regarding the sale of the estate. There were four major areas of concern:

  1. Failure to Notify & In-House Transaction

Four co-owners comprised the sellers of the estate. The sales agent worked with primarily with one of the co-owners – in this case, the estate trustee — and other members felt as if they did not receive proper guidance or notification during all phases of the sales transaction. In particular, one of the siblings believed the sales agent misrepresented her role as seller AND buyer agent, which they deemed a potential conflict of interest.

  1. Dereliction of Duty

Owners of properties may not always be close enough to the property’s location to be familiar with potential condition issues, and this sometimes results in disclosure issues with the property itself or its contents. In this case, the co-owners were unable to verify the condition of the estate and its contents prior to sale. The sales agent arranged for repairs and handling of family belongings; during this process, some belongings were damaged. The agent also was alleged to have arranged for repairs in excess of the co-owners’ wishes.

  1. Self-Promotion

The sales agent used the estate property to produce a promotional video of her services, and did so without the consent and authorization of the sellers. The costs of video production were passed to the sellers as well, again without consent or authorization.

  1. Improper Representation

The sellers believed that they were misled by the sales agent during the transaction. In particular, potential buyers were represented as a family, when in fact, the brokerless buyer was a property rental professional who intended to make the estate a rental property. This fact was not disclosed to the sellers until closing. Prior knowledge of the true nature of the buyer may have influenced the sellers to not accept a sales offer.

What Went Wrong

 In the case of the Virginia estate sale, the four sibling co-owners believed they were not adequately informed of all the transaction details. They also had legitimate concerns about unethical practices on the part of the sales agent, particularly that of the agent’s nondisclosure of a brokerless buyer and by misrepresenting the nature of the actual buyers. Estate sales are always complicated affairs, as family members are often emotional when it comes to parting ways with the family home. It can be easy for sellers to feel as if they are being taken advantage of, and those feelings in this case were compounded by the travel restrictions imposed by COVID-19.

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