What Legal Precautions Should You Take in Real Estate Business?

What Legal Precautions Should You Take in Real Estate Business?

Expert Advice

Real estate is arguably among the most profitable industries on the planet. There are a whole host of ways you can professionally build a business in the property space from house flipping to property management, buy to let and real estate sales, just to name a few.  The risks and rewards vary depending on which area you decide to focus on. 

 

Like most businesses however, starting a real estate business requires you to observe certain legal and regulatory compliance issues. Despite how enticing it may seem, a single lawsuit could easily bring a real estate business to its knees as there are many ways to be held liable. This is why it is crucial to understand the potential legal issues your business might face so you can avoid pitfalls from the word go, even as the world awaits recovery from the effects of the COVID – 19 pandemic.

 

Without further ado, here are some legal precautions you should take for your business as a real estate entrepreneur.

 

1.  Get Legal Advice

 

When starting any high-risk business, you have more than a few reasons to work with a competent legal advisor. As earlier mentioned, real estate lawsuits can be quite expensive, enough to bring your business to a halt.

 

As explained in the article on this URL, this is why many property buyers and sellers approach experienced real estate lawyers before conducting property transactions. Seeking legal advice from the word go can help protect your business from a huge amount of legal risks, some of which we shall mention in the pointers that follow below.

 

 

2. Avoid Property Disclosure Issues

 

This is among the most commonly encountered issues in the business of selling property. It's often joked about that a 'cosy' home is another way of saying small and a home with character, really means it needs a renovation.  These are technically fine in the property listing as long as you disclose major issues.  

 

As this type of deception, may get you in legal issues with clients. Even if you aren't a broker and are selling property on your own, the same rules apply. You might consider your exaggeration of a property's immaculate condition, which it isn't, as a clever technique to sell it, but the law sees it differently. Instead, the law perceives this as a potential reason for someone to file a lawsuit against you.

 

It is, in fact, one of the most common reasons why real estate brokers encounter lawsuits, some of which are overly costly. It is fundamental to reveal or disclose specific details about the property or you risk being found guilty of fraud. To avoid this issue, keep your property claims genuine and honest. Make certain that a potential buyer understands exactly what you're saying and what you're offering to them.

 

3. Steer Clear Of Dual Representation

 

As a real estate broker, the last thing you would want to do is represent both sides (the buyer and seller). From the look of it, dual representation is sometimes considered unethical. This explains why dual agency it is prohibited in eight states in the US, including Alaska, Texas, Colorado, Florida, Wyoming, Kansas, Oklahoma, and Vermont. It could easily spell a conflict of interest, and when you're not working in the best interests of either client, legal problems could soon ensue. In most states that allow it, becoming a dual agent requires you to have a written, verifiable approval.

 

 

4. Avoid Deceitful Advertisements

 

Real estate law requires that agents and brokers follow a certain set of advertising standards. In the US these are outlined in the National Association of Realtors code of ethics (NAR) and are a good reference source globally. These laws primarily address the accuracy of the information offered by advertisements and require that agents always use accurate photographs of the property in their promotions.

 

These restrictions have recently been extended to internet advertisements, which should also be genuine, true, and accurate. You should make sure that the advertising material you post is accurate and adheres to the rules in your state.

 

5. Environmental Issues

 

Asbestos, polluted water and leaded paint are just a few of the environmental concerns that might land agents or brokers in legal trouble. Wise real estate entrepreneurs should have such issues referred to competent individuals for inspection. Failure to do this could easily result in legal issues arising from environmental laws. It pays to be well-versed about the common environmental concerns in your area so you can avoid this kind of legal trouble. Suggesting environmental inspectors to your buyers is also a great way to distance yourself from legal problems associated with environmental law. 

 

Every real estate transaction carries a significant amount of legal risks and repercussions. As a current or aspiring agent, it is critical that you become familiar with these legal difficulties and endeavor to avoid them in order to prevent potentially disastrous results. Hopefully, the few pointers above shed some light on the precautions you should take to avoid legal issues while running a real estate business.