Legal Pitfalls for Real Estate Agents: What You Need to Know

Real Estate

Lawsuits against real estate brokers and agents are common. These suits can be based on common law or statutory laws. Misrepresentation is one of the most common legal problems that realtors face. It can include deceptive advertising, such as exaggerating property features in print or online advertisements. Brokers should also be mindful of the Fair Housing Act. This law can prevent discrimination based on race, social class, or disability.

Fair Housing Act

Both renters and buyers are shielded from discrimination based on race, religion, national origin, sex, and family status by the Fair Housing Act. Real estate professionals can’t steer homebuyers away from specific neighborhoods based on these characteristics, also known as “blockbusting.” Even seemingly innocent remarks during the listing process can violate fair housing laws. For example, calling a property a “bachelor pad” could discriminate against people without families. NAR members must be careful to avoid such language in their advertising.

It’s easy to get into trouble as a real estate agent by violating state law or the Code of Ethics. A lawsuit or a finding of wrongdoing may result in fines, penalties, or damages, as well as damage to an agent’s reputation. Elk River realtors frequently review local and state laws to keep up with changes.


Misrepresentation is one of the most common legal issues for real estate agents. It occurs when an agent makes a false statement or omits essential facts. It can include listing a property as “new” when it is damaged or failing to disclose a problem with a home that a buyer would want to know about. In addition, real estate agents must avoid making statements that could violate fair housing laws. For example, a property that is not accessible to people with disabilities can violate the Americans with Disabilities Act. Should real estate agents really be giving legal advice in Minneapolis, MN? Newer real estate agents often need to correct this area, but experienced investors know the law and take all the necessary precautions. They also understand the importance of keeping records of their advice to clients to avoid accusations of misrepresentation.

Failure to Disclose

State law and industry regulations require real estate agents to disclose property defects, but they must be careful not to conceal too much. For example, if a ten-foot spider lives in the attic, it’s probably not worth mentioning to buyers. It’s also important to be forthright with homebuyers about any apparent problems and latent issues, as doing otherwise can erode buyers’ trust and prompt legal action. Moreover, if the buyer discovers a property defect that was not disclosed and feels dissatisfied or cheated, they may sue for breach of fiduciary duty or negligence. A real estate attorney can help determine the best action in such cases. Depending on the circumstances, this might involve litigation or mediation. Each state has a different statute of limitations for these claims.

Breach of Fiduciary Duty

One of the most important fiduciary duties real estate agents owe to their clients is loyalty. It means that they must put their own personal and financial gains aside to protect the best interests of their clients. To be found guilty of breaching this duty, it must be shown that the agent’s actions caused a specific loss to their client—for example, a trustee selling property cheaply to a relative breaches fiduciary duty. Still, to win damages in a lawsuit, the plaintiff must show a clear link among the two transactions. Real property agents must also keep personal facts approximately their clients, which includes their budgets and reasons for purchasing a assets. Breaching this duty ought to bring about a rescission, in which the buyer is refunded and the belongings lower back to them.

False Advertising

As a real estate agent, you must follow fair housing marketing practices. Your marketing must not be discriminatory and must reach all potential applicants. For example, relying solely on word-of-mouth marketing or placing “for rent” signs in a neighborhood without other, broader advertising can exclude residents from the market area and contribute to segregation patterns. Brokers should disclose their firm name and licensure state (s) in all their advertising. It is also unethical to advertise a property appearing in the MLS without authorization from the listing agent. Similarly, it is unethical to make statements about financing that fall within the purview of the Fair Housing Act. Victims of false advertising can file a claim with their local consumer protection agency.