The facts
The listing agent’s failure to closely review the terms of an offer resulted in a malpractice claim against the brokerage firm, which also employed the buyer’s agent. The seller originally listed a house at $295,000. After the property had been on the market for a period of time, the seller instructed the listing agent to reduce the price to $286,000.
While in the office one day, the listing agent mentioned to the buyer’s agent that a nice price reduction was going to be made on the house. When the buyer’s agent asked what the reduced price would be, the listing agent replied “$186,000” instead of “$286,000”. The buyer’s agent asked the listing agent if he was sure there was going to be such a reduction.
The listing agent said that the seller was anxious to move. The listing agent did not recognize his mistake, and there was no documentation or written communication between the agents concerning the discussion over the price reduction.
Before the listing was changed in the MLS to reflect the price reduction, the buyer’s agent called the listing agent to advise that his customer was making a full price offer for the house. He delivered an $186,000 offer to the listing agent.
Without reviewing it beforehand, the listing agent presented the offer to the seller, commenting that it was a full price offer. He discussed some of the terms of the offer with the seller, but neither one of them noticed that the offer was $186,000 rather than $286,000. The seller signed the contract.
The result
The company recognized that liability was adverse due to the listing agent’s errors in misquoting the reduced price and failing to review the amount of the offer made. The insurer retained defense counsel to protect the interests of the agents and the brokerage firm. The subject property was appraised for less than the reduced listing price the seller authorized, but more than the offer. Through negotiations, the case was settled within a few weeks, and the closing proceeded. The buyers agreed to increase their offer by $20,000, the agents waived their commissions, and the insurance carrier contributed $45,000.
Risk factors
Risk factor #1
In this case, perhaps because he worked in the same office with the buyers’ agent, the listing agent was not as diligent as he might otherwise have been in communicating the reduced price on the house to the seller’s agent.
Risk factor #2
No written documentation was made to note this conversation and/or changes made.
Risk factor #3
The error was further compounded when the listing agent failed to carefully review the offer prior to presenting it to his client, resulting in a claim with exposure well in excess of $100,000. All offers and counteroffers should be carefully reviewed prior to being presented to clients.
*The claim scenario is strictly documented for illustrative purposes only and provides an example of what a policy could cover. It is intended to provide a general overview of the program described. Please remember only the insurance policy can give actual terms, coverage, amounts, conditions and exclusions. Program availability and coverage are subject to individual underwriting criteria.
