Macro trend lines within the housing market continue to show warning signs that there will be a prolonged deceleration of home sales within the United States. While home prices have risen year-over-year, they are doing so at a declining rate, and with month-over-month drops persisting. The impact of inflation and rising interest rates, which have caused mortgage rates to surge towards 7%, has resulted in many consumers, particularly first time buyers, being forced to hold off from purchasing properties. Inventory levels, which plummeted during the pandemic housing boom, have begun to climb again rising year-over-year and all signs point towards an unwelcome slowdown.
Adding to these challenging times, real estate firms should expect to see an increase in the number of lawsuits that are filed against their agents in the coming months. Historical precedent dictates that as the housing market cools, instances of buyer’s remorse will increase. As home values stagnate or even drop below their purchase price, the “last batch” of buyers can often become resentful and their frustration can frequently be directed at their agent or other professionals involved in the home buying process. Issues that were once minor inconveniences or easily overlooked now turn into matters to be litigated before the courts. Agents who are sued face no greater likelihood of being found at fault in a down market, but the number of professionals who find themselves party to a lawsuit will escalate.
Recommend your clients purchase a home warranty
The likelihood of an already frustrated home buyer becoming increasingly exasperated is reduced when a home warranty is in place. Should a hot water heater fail several months after closing, a home warranty offers an easy avenue for replacement. The buyer no longer has a need to stew on the minor issues they believe were not disclosed to them in the buying process or the contingencies that they might have waived.
Make sure you are using current market comparables
In a rapidly fluctuating market, it’s vital that you provide your clients with an up to date comparative market analysis (CMA) to ensure any offers they submit are fair and competitive. Using data from a CMA carried out months prior could leave your clients at risk of feeling that they submitted an offer misaligned with market conditions.
Provide full and complete disclosure
With dissatisfied home buyers looking for reasons to potentially sue their real estate agent, it is critical that you disclose all known defects, hazards and other relevant facts to your clients. If it is relevant and you are aware of it, so should the buyer or seller that you represent.
Secure, strong and stable errors & omissions (E&O) insurance coverage
It is vital that you have quality E&O coverage in place with a strong and stable insurer who has experience dealing with different market cycles. Partnering with a specialist provider with a long track record of serving the real estate industry matters as lawsuits increase.
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