In the Risk Identification section of this subject, we identified the agency duties of loyalty, obedience, confidentiality, disclosure, reasonable care and diligence, and accounting as the source of listing side direct risk. Each of these duties was analyzed in the Risk Analysis section. We also identified the Unlawful Trade Practices Act as a source of direct risks. Here, we are interested in mitigation techniques that can be used to reduce the risks generated by these sources.

Risk mitigation is mostly about keeping clients and customers informed regarding those issues that may be material to their decision to purchase or sell. That sounds like, and in some ways is, a daunting task. There is no end of things that can go wrong in a real estate transaction.

Much of risk mitigation is about anticipating, looking for if you will, those things in a transaction that create risk for your client or yourself and coming up with some way to lessen (mitigate) that risk. What follows is a discussion of common problems that arise in real estate transactions and some potential solutions. Before getting into that discussion, however, a few words are in order about giving general information to clients about the risks inherent in real property transactions.

First, it is important to understand that providing a client with general information about potential risks will not protect you from misrepresentation claims or claims based on failing to protect your client from an actual risk. For instance, a general disclosure that houses sometimes have mold in them and the mold can sometimes be a health hazard will not protect you from a claim of misrepresentation or lack of diligence if there is mold in the particular house being sold and a reasonable licensee would have known there was mold in the house.

The fact that a general disclosure will not protect a licensee from a specific claim of misrepresentation or lack of diligence in a specific case does not mean that providing clients with general information about the potential risks involved in a real estate transaction is not a good idea. It is! Providing important information to clients is part of due diligence. It takes away any claim that the client didn’t know what to look out for, or didn’t understand what was happening or the importance of their decisions – for instance, the importance of the buyer having the property inspected or the seller disclosing known latent material defects.

The easiest way to provide general information about the risks inherent in real estate transactions in Oregon is to use buyer and seller advisories. The Oregon Association of REALTORS® (OAR) has developed both documents for use by members. The Buyer’s Advisory is available through OAR and on the Oregon Real Estate Agency’s website. The document is available on the Agency’s website so that the limitations on licensee duties found in the Advisory are public information. Click here for a copy of the Buyer’s Advisory.

A Seller’s Advisory is available to REALTOR® members on OAR’s website at www.oregonrealtors.org. This document is not intended as a public document. Its use is limited to members of the Oregon Association of REALTORS®. The Advisory provides sellers with important information and is typically given at the time of listing. Click here for a copy of the Seller’s Advisory.

It is always a good idea to document information provided to clients. The Advisories are no exception. Accordingly, some agents have their clients acknowledge receipt of the Advisory. Others incorporate acknowledgement of receipt in the Client Engagement Letter. Click here for a complete discussion of engagement letters. Whatever the method of acknowledgement, it is good risk management to start any agency relationship with a client advisory.
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