Avoid practicing outside of the scope of your license

Going beyond the scope of your license puts you at risk.

Your buyer clients examine a crack in the living room wall. “How did we miss this before we put in an offer?” they ask themselves. “Is this cosmetic or a sign of serious foundation damage?”

They hand the home inspection report to you and ask what you think. While a little reassurance from you could be just the thing that prevents this deal from falling through, that type of comment could put you and your broker at risk.

You are not a licensed home inspector. You are not qualified to interpret a home inspection report. The proper thing to do in this scenario is to tell your clients to reach out to the home inspector or hire a qualified professional to answer their questions.

Stay Away From Uninformed Advice

It’s easy for agents to get into legal trouble by acting beyond the scope of their real estate license, says Barney Schwartz, senior vice president at Assured Partners, a Texas REALTORS® risk management partner. “Saying something like ‘Don’t worry about that—the home inspector is being paranoid,’ is getting into the business of interpreting the home inspection report,” he warns. Offering uninformed opinions is not helpful to your clients. You want to help them make the best possible decisions, but weighing in outside of your expertise may steer them in the wrong direction.

Offering legal advice is another common example of putting yourself at risk. For example, don’t interpret those HOA documents—direct your clients to the HOA or an attorney if they have questions, Schwartz says.

Financial advice is another potential risk. “You can go backward and explain what real estate has done historically,” he notes. “But you can’t go forward and predict what real estate will do in 10 years.”

Another volatile topic is pest control. “Don’t ever give advice on if something can be treated,” Schwartz warns. “Advise your client to call the exterminator and get a professional opinion.”

Recommend Experts, Then Follow Up with Documentation

While speaking off-the-cuff is a risk, the bigger issue is a lack of documentation. Agents should follow up client meetings with an email summarizing their conversation and next steps, according to Schwartz. Doing so offers you protection if you had to defend yourself in a lawsuit.

E&O Can’t Help You Outside of Your Scope

It’s important to note that your errors & omissions insurance will not help you if it’s determined you acted outside of your real estate license. “E&O insurance is occupation-specific,” Schwartz explains. “They insured you as a real estate agent, not a CPA or a lawyer or another professional.”

Say you are helping your client sell the property of a franchised oil-change business. The next thing you know, you’re being asked about information related to the sale of the franchise. Wading into that topic is trouble. “Now you’re not acting as a commercial real estate agent but as a business broker,” Schwartz says. “If a lawsuit comes in based on the sale of the business, there’s a very good chance your insurance claim will be denied because you were acting outside of the scope of your license.”

You Might Be Able To Fix It if You Act Quickly

If you realize you’ve gone beyond your expertise, you may be able to fix your mistake if you act quickly. “Try to get a licensed professional involved right away to see if you can reverse course on the advice you gave,” he says. “Tell your clients you may have been wrong and get the professional opinion.”

Reach out to your broker if you have questions. Your broker can advise you how to respond to subjective questions and situations. It’s when agents get creative with responses that they endanger themselves, according to Schwartz. “You want to offer the best customer service possible, but you don’t want to get sued.”