3 Common Real Estate Mistakes That Lead to E&O Claims

In real estate, reputation and relationships drive success — but even the most experienced, ethical agents can find themselves facing Errors & Omissions (E&O) claims. Every transaction involves hundreds of moving parts, tight deadlines, emotional clients, and legal documents. It only takes a single miscommunication or overlooked disclosure to trigger a dispute.

The truth is that most E&O claims aren’t about intentional wrongdoing — they stem from misunderstandings, administrative oversights, or unclear expectations. Whether or not you’re at fault, defending yourself can still cost tens of thousands of dollars in legal fees, not to mention the stress and lost productivity.

Here are three of the most common mistakes that lead to real estate E&O claims — and how to prevent them before they cost you your peace of mind (and your commission).

1. Failure to Disclose Property Defects or Prior Repairs

The number one cause of real estate E&O claims continues to be non-disclosure or incomplete disclosure of property defects. Buyers often discover post-closing issues that weren’t clearly communicated during the transaction — from foundation cracks and roof leaks to water damage or mold. Even if you weren’t aware of the defect, you may still be named in the lawsuit alongside the seller.

Why It Happens

Disclosure laws vary by state, but buyers generally expect that both sellers and agents will be transparent about known or suspected issues. Problems arise when:

• The seller withholds information (and the agent doesn’t verify).
• The agent relies solely on the seller’s statement without independent observation.
• Repairs are mentioned casually but not documented properly.
• “As-is” listings create confusion about what was disclosed versus what was inspected.

How to Reduce Disclosure Risk

• Document everything – Keep written records of what the seller disclosed, what was visually observed, and what was communicated to the buyer.
• Encourage thorough inspections – Remind buyers that professional home inspections are their best protection — and put that advice in writing.
• Never assume “minor” repairs don’t matter – What seems small to one party can be material to another.
• Avoid speculation – Stick to facts. Never downplay or offer opinions about potential defects (“That’s probably just normal settling”).
• Keep copies of seller disclosure forms and inspection reports – These can serve as your defense years later if a dispute arises.

When in doubt, disclose — overcommunication is always safer than omission.

2. Miscommunication During Multiple-Offer Situations

In today’s fast-paced markets, multiple-offer scenarios have become the norm. While exciting, they’re also a breeding ground for misunderstandings that can turn into E&O claims. Buyers and sellers under pressure often act emotionally, and one perceived slight or lack of transparency can spiral into accusations of favoritism, mishandling, or breach of fiduciary duty.

Common Pitfalls

• A buyer claims their offer wasn’t presented promptly or fairly.
• A seller alleges that advice about competing offers was unclear or incomplete.
• An agent forgets to document verbal conversations about counteroffers or timelines.
• Dual-agency arrangements blur communication and lead to conflicts of interest.

How to Prevent Multiple-Offer Disputes

• Follow your state’s real estate regulations and brokerage policies for offer presentation and documentation.
• Communicate in writing whenever possible – Confirm verbal discussions with follow-up emails summarizing key points.
• Maintain impartiality – Treat all offers objectively and document your communication trail.
• Clarify your role in dual-agency scenarios – Ensure both parties acknowledge the limits of your representation in writing.
• Avoid vague statements – For example, instead of saying “You’re the strongest offer,” provide factual, compliant feedback.

Transparency is your best defense. When every step of communication is documented, you can demonstrate professionalism and fairness — even if one party is unhappy with the outcome.

3. Paperwork or Deadline Errors in Contracts and Addendums

Real estate transactions live and die by paperwork. A missed signature, incorrect date, or forgotten addendum can cause a deal to fall apart — and in many cases, lead to allegations of negligence or financial loss.

Why Administrative Errors Lead to Claims

When deadlines for financing, inspection, or contingencies are missed, buyers and sellers can lose leverage or money. Agents may be blamed for not tracking timelines properly, using outdated forms, or failing to follow up with the other party’s agent. Even simple clerical errors can become the basis of a claim if they affect a transaction’s outcome.

How to Minimize Paperwork Risks

• Use checklists for every transaction – Track signatures, forms, and key milestones from listing to closing.
• Confirm receipt of all documents – Always obtain written acknowledgment when sending or receiving contracts, disclosures, or notices.
• Rely on digital tools and transaction management systems – They provide automatic time stamps, reminders, and audit trails.
• Review documents carefully before submission – Slow down to verify names, dates, and dollar amounts — especially under pressure.
• Collaborate with your brokerage’s compliance department – They can help catch issues before they escalate.

Accuracy and attention to detail show professionalism — and help prevent small administrative errors from becoming expensive legal battles.

The Role of E&O Insurance — Your Safety Net in Every Transaction

Even with impeccable communication and documentation, E&O claims can happen to any real estate professional. That’s why maintaining active Errors & Omissions insurance is critical for protecting your business, your income, and your reputation.

What E&O Insurance Covers

• Legal defense costs — Even if you’re not at fault, defense fees can reach thousands of dollars.
• Settlements and judgments — Covers damages from claims of negligence, misrepresentation, or paperwork errors.
• Regulatory and arbitration proceedings — Some policies extend protection to administrative hearings or board complaints.
• Past transactions (retroactive coverage) — Ensures protection for work done under prior policies, if maintained continuously.

Why It Matters

Without E&O coverage, one claim can easily exceed your annual income — especially if you must pay legal costs upfront. A strong policy ensures that your insurance, not your checkbook, handles the fallout when disputes arise.

Protect Every Deal — and Your Reputation

Real estate is fast-moving, detail-heavy, and emotionally charged — a combination that makes E&O protection essential. By disclosing transparently, communicating clearly, and managing paperwork diligently, you can minimize exposure while maintaining trust with clients.

Each of these common mistakes can lead to expensive disputes — even when you’re not at fault. But with proper risk management and reliable insurance, you can focus on closing deals, not fighting claims.

Call Defy Insurance Agency at 877-780-4626 to get a free quote or schedule a policy review today.

Defy Insurance Agency helps real estate agents and brokers nationwide secure tailored Errors & Omissions coverage — so every transaction is backed by financial protection, professional credibility, and peace of mind.