How To Protect Yourself Against Liability When Listing And Selling Short Sales.

Hi folks. Have you ever been sued by a Seller or Buyer?? I haven't. But if I were I'd be ready to stand in front of any judge and defend myself.


It's my opinion that over the next few years there is going to be a huge increase in lawsuits against agents and brokers. Mostly related to Short Sales. That Seller you helped is going to be real pissed off, 5 years from now, when he is slapped with a deficiency judgment and his wages and assets are garnished.

Will you be prepared to defend yourself? Do you have a written record of what when down during the Short Sale process? Or did you just wing it?

Here are some things I do now to protect myself in the future. Hopefully there are a few you can implement into your business. Even better, maybe you have some ideas that I can use.

  • Make sure you are covered with your E &O insurance.

  • Use email as often as possible for communications so you have a written record of the conversations. If you do have a phone conversation with a customer/client follow up with an email and outline the points that were discussed. This also helps to eliminate confusion. "Your Honor he never told us that" Yes I did. Look here.

  • Have a disclosure package at time of contract (listing or BBA) that outlines the short sale process in detail and what can be expected. Have this all signed and dated along with the MARs disclosures. "We thought he was giving us legal advice so we didn't hire an Attorney". Sorry, but you signed 3 different times that I was NOT an Attorney and that I was NOT giving legal advice.

  • Have a log of every action you take related to the short sale. I use Google Calendars for this. My Sellers share in this so that every time I make a notation they receive an email. A recent transaction had over 300 notations. That equates to 300 email updates to my Seller. It would be very difficult for them to tell a Judge I didn't do my job properly. "Your Honor he didn't do anything and we were foreclosed on because of it". I don't think so.

  • After each closing ask your customer/client to write you a testimonial. Place this in the file. "But your Honor read this. They said I was awesome!!"
I believe if you do these few things you will be good to go if a lawsuit comes your way. Plus the added benefit is that you will be better at what you do if you remember that everything you do needs to be defensible in a Court of Law. What say you?

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