Risk Management in Real Estate
The practice of real estate is such a legalistic business and we take our jobs far too lightly. I think one of the reasons is because we haven’t had a transaction that ended up in litigation. In all my Risk Management CE classes, I use this illustration; “When you driving down the road and you’re speeding, and you look in your rear view mirror and see a blue light flashing, it’s too late to be concerned about how fast you were going.” The damage is done. You knew the speed limit, and you knew if you were caught speeding, you would suffer the consequences. The same thing is true in real estate.
As licensed real estate agents we are supposed to know the law. When we are licensed we set ourselves apart as professionals in the real estate industry. That license signifies to the consumer that you have been educated, passed extreme examinations, properly trained, and that you are qualified to assist anyone when buying or selling real estate. The consumer should but seldom does, interview an agent before employing them to find out if they have sufficient expertise to represent their best interest.
When a real estate agent looks in the mirror, they should see an invisible phrase branded on their forehead that says, “Manage my Risk today.” Sometimes Realtors® get so caught up doing their daily performances they lose track of the risks they are taking. They don’t recognize their need for continuing education until they experience legal issues but it’s too late to manage the risks on that transaction. They just have to guard against it on the next transaction.
Managing risk is all about taking precautionary measures before a problem occurs, to make sure that the problem never comes up. If we know the laws, rules, regulations, and company policies, and live by our Code of Ethics, preventing a potential problem is fairly simple. I use the medical profession as an example in my classes. A doctor graduates from medical school and is licensed to practice by the state. At that point they have sufficient education that provides a medical background, but they are just now ready to start learning how to become a good doctor. They learn from their successes of good decisions, and they learn from their mistakes. They constantly read case studies of various diseases, symptoms, cures, drugs and etc. The longer they are in the business, the more continuing education they need.
I don’t put a lot of confidence in every home inspection I see because that home inspection is performed by someone I may not know; that is I don’t know their background, their past performances. However, I almost mandate that a potential buyer have a home inspection done. Home warranties are same way. I strongly encourage every seller to purchase a home warranty; not for covering repair cost, but to transfer the liability from the owner to the company providing the home warranty. These two inspections will greatly reduce my client’s risks and well as reduce my brokers risks.
Alabama Real Estate Institute