There is a myth that has permeated our real estate industry for years. Many real estate agents believe that providing clients with three vendor names magically reduces their liability. Some agents even believe that they are required by law to provide three names. I can’t blame agents for believing this. The fact is most agents have been told this nonsense multiple times through poorly drafted office policy, by instructors at real estate agent schools, and sometimes even by some really ill-informed real estate lawyers.
Let’s examine why this makes no sense. First, if your vendor list is comprised of the world’s best vendor who does outstanding work that is so far above everyone else and two other vendors who just don’t measure up, how exactly will you be protected from the lesser vendors’ inferior work? Is that really going to be your defense to the court? “Your honor, I gave them three names. I am not responsible. It just happens one of the vendors on my list was really good and the other two stink. They picked the wrong one.” I have represented real estate agencies for most of my career and in over 23 years of practicing law I have never seen a case dismissed because the agent said “but I gave them three choices.” This is not a defense, it is a cop-out.
Secondly, the job of a real estate agent is to advocate, advise and counsel your client. So why would an agent give their client a list of three vendors who likely vary in quality? How is that adequately advising and counseling your client? The clients who choose correctly win but the others lose. You provide superior service to your clients by advising and counseling and that includes providing recommendations of quality vendors. By providing three vendors of varying quality you could actually be setting yourself up for liability.
Lastly, when you recommend the best vendor to your client and a problem unexpectedly arises the problem usually gets resolved. That is one of the reasons why this vendor is the best. If you let your client pick from a list of three and the one they pick is not very good, how effective are you going to be in getting the vendor to correct the issue? If you have a great vendor that you regularly recommend that vendor will do what is right to protect their reputation and relationship with you. The secret to avoiding lawsuits is never to get into a situation where the client has a reason to file one.
Clients expect more from their real estate agents than a list of three names. The risk you have as an agent is not how many names you provide but rather how you refer the vendor. A proper way would be to say something like, “My clients have worked with Blair Cato many times in the past and all seem to have had a great experience. I am more than happy to provide you their contact information if you would like or I can provide you another name if you prefer.” What you do not want to say is, “You have to use Blair Cato. They are are the only firm I use. They are perfect and never make mistakes.” While we would love such an endorsement you cannot make decisions for your client and while Blair Cato is a great firm we are human and make the occasional mistake.
The good news is we do not see negligent referral cases against real estate agents in South Carolina but even if we did arguing that you had a list is no protection from liability. You would not give your mother the name of three doctors and say pick from a list. In fact if your family doctor said you need surgery, pick one you would probably find a new doctor. If you need further confirmation the next time you are speaking with your E&O insurance agent ask them if providing three names shields you from lawsuit. Then sit back and watch them laugh.
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