Fraudulent listings a concern
When it comes to listing fraud, who exactly is liable for a fraudulent listing appearing online, or at worst being sold to an unsuspecting homebuyer, is currently ambiguous, but Miguel Berger, the senior vice president of growth at Property Shield, said consumers won’t hesitate before blaming the agent.
Over the years, Berger said Property Shield has removed roughly 492,000 fraudulent listings from major platforms for its customers. Additionally, Berger noted that in 2024 alone listing fraud cost consumers $173 million according to a report by the Federal Bureau of Investigation (FBI).
Listing fraud, which is also known as seller impersonation fraud, is most common in Atlanta, Dallas, Phoenix, Denver and Los Angeles, according to Property Shield data.
“We found on average that between 15% to 25% of listings are fraudulent in any given market — no matter small markets or big markets — the issue is pretty much everywhere,” Berger said.
According to Berger, fraudulent listings can lead to trespassing, squatting and even property damage, causing a “liability time bomb.”
And while awareness of the issue is important, Berger noted that fraudsters are becoming more sophisticated in their attacks and deception.
“Fraudsters are getting more sophisticated, so whatever we think we know, we don’t know,” Berger said. “Proactive monitoring of listings is the only scalable solution.”
Error and omissions is not just the cost of doing business
For real estate professionals, there is perhaps nothing more mundane than E&O insurance. But while many simply write it off as a cost of doing business, Steven Stecker, a senior vice president at insurance firm Victor, highlighted some trends that Realtors should be aware of.
In 2024, Stecker said his firm paid $37 million in E&O claims.
“We do pay a lot of claims and the industry in general pays a lot of claims,” Stecker said. “On top of that, what we are really seeing, especially coming out of the pandemic, is both the cost and the frequency of claims is going up, so that we have a severity issue and a frequency issue.”
Stecker said that while the frequency issue is beginning to stabilize, the severity issue continues to accelerate.
Illustrating this increase, Stecker said, is the fact that the average paid loss for a real estate agent has increased by 60% over the last 10 years. Driving these increases, according to Stecker, is social inflation, which includes everything from rising home costs to rising construction costs, to the relative success rate of plaintiffs attorneys going after real estate industry players.
When it comes to where Victor Insurance sees the most claims, the South tops the chart being responsible for 33% of all E&O claims, while the Midwest claims the smallest share at 19%. As for the types of claims, negligence is the most common with 3,450 claims in 2024, followed by misrepresentation with 2,097 claims. Breaches of fiduciary duty made up 755 claims. And while it was not broken out on his graphic, Stecker warned agents against dual agency, claiming that it severely increased their liability.
“When you act as a dual agent, just know that you are really putting yourself at risk because from an insurance standpoint, the only person we can go after is you because you were on both sides of the transaction. There is no one else at fault, and it just really lends itself to that misrepresentation piece,” Stecker said. “We see it all the time. It is a really huge driver.”
The unsexy side of AI
While AI might be all the rage, before agents and brokers go all in on AI, Rick Janson, a Denver-based Realtor and AI productivity consultant, said there are some security concerns they should be aware of if they want to mitigate risks.
Janson acknowledged that many agents and brokers are using AI to automate tasks, such as data input and marketing and to do things like create a comparative market analysis, but he asked agents if they were using the free versions of things like Google Gemini or ChatGPT to do this, as the free versions, and even some of the lower price tiers of paid versions use the data users input to train their models.
“All of it has to be trained on data in some way,” Janson said. “So, if you are using the free version, they are actually using your data to train the model and to continue to refine the model.”
Janson told agents that they should never upload a client’s bank statement or input a social security number into a large language model AI tool.
“Even when using the paid version, especially on ChatGPT, you need to opt-out of it using your data to train the model,” Janson said. “Always verify platform security before processing any sensitive data, and always protect client’s personal information, contract terms and negotiation details.”
In addition to protecting data, Janson also cautioned that agents need to double check any output made by their AI tools, as the tool might generate language in marketing collateral or listing descriptions that violate Fair Housing laws.
“Even with virtually staging, it might distort the dimensions of the room, so I always put a watermark on the photos that were virtually staged and list the approximate dimensions of the room,” Janson said. “You just want to make sure you are complying with MLS and brokerage rules.”
If there was one takeaway from the room, it was this: risk management isn’t extra credit anymore. It’s the cost of staying in business. And for agents who want to protect their clients and themselves, the time to button things up is now, not “someday.”
