The subprime mortgage problem is not just for houses any more, as its repercussions permeate the overall economy. There are more difficulties to consider, however, than just whether the housing market will continue to implode.
One of those difficulties may be heralded by a lawsuit wending its way through the courts in California. A San Diego County couple is suing their real estate agent, saying that he misled them as to the value of the home they bought. The suit has the potential for a very broad effect for thousands of disgruntled homeowners, their agents, and appraisers.
Not all real estate professionals carry errors and omissions insurance. According to Walter Molony, senior public affairs specialist at the National Association of Realtors (NAR), which counts more than 1.3 million members, only 24% of NAR members are covered by E&O insurance (figures come from a 2007 member survey). Firms with salaried licensees, he adds, are covered at a slightly higher rate: 29%.
However, according to an industry professional at a major E&O insurance provider who wished to remain anonymous, 13 states require real estate agents to carry insurance, and real estate franchisees are also required to carry coverage, with most carrying a million-dollar limit of liability. Some small independents, the industry professional says, have a limit of a quarter or half million dollars, but “95-plus percent carry $1 million in coverage.” Indications are that this large segment of insured realtors works for national or regional chains rather than as independents.