Real estate agent liability refers to instances where a real estate agent has violated the law or real estate professional conduct guidelines. In such cases, it may be difficult to tell which parties are responsible (i.e., liable) to a seller or buyer client. This is because in any real estate transaction, there may be multiple persons and parties involved.

For instance, parties may include:

  • The real estate agent (the salesperson directly working with the buyer)
  • A real estate broker (this person manages and supervises the salesperson)
  • Home inspectors and appraisers
  • Mortgage and loan companies
  • Lawyers and other professionals

Real estate agents may become liable if they breach a duty that is owed to their client. This can happen in a variety of ways, such as through the use of fraud, or through a breach of contract.

What Is an Agency Relationship?

Real estate agent liability for client’s losses often depends on what type of relationship they have with their client. Generally speaking, the agent becomes liable if they owe the client certain duties under law or under a real estate contract. These duties form once the agent forms a formal "agency relationship" with the client.

An agency relationship is usually formed when the agent and client make a contract regarding the real estate sales transaction process. For instance, an agency relationship may create the following duties for the agent:

  • Placing listings in a home listing service
  • Finding potential buyers or sellers
  • Reviewing real estate and legal documents
  • Placing any money that the client has turned over in a separate account (i.e. fiduciary duty to the client)
  • Informing the client of any changes in offers or negotiations

Violations of these duties may lead to a lawsuit which involves monetary damages awards for the plaintiff’s losses.

A non-formal relationship between an agent and a seller or buyer does not create the same obligations. For instance, if the agent is simply giving tips or pointers to a person, and has not formed a working contract agreement with the person, they are generally under the same duties to that person. While they are obligated to make proper representations and give accurate information, they might not be required to seek out listings, etc.

Do I Need a Real Estate Lawyer?

Real estate transactions can be complicated and may involve many different persons. You may wish to hire a real estate lawyer for help during the real estate process. Your attorney can provide you with legal advice, and can also inform you of your rights under state rules. Also, if you need to file a claim against an agent, your attorney can help you with the filing and can represent you in court.