In a litigious society, conventional wisdom suggests that you pass the buck as often as possible to avoid being sued. In real estate, that's referred to as "risk management."
"Risks for real estate agents and brokers can be reduced greatly if we can shift them to someone else," said Marcie Roggow, a real estate agent and president of Creative Learning Concepts in Sioux Falls, Iowa.
For example, she said, home inspectors "realize that we have shifted the risk to them, so they are now trying to shift the risk to someone else. You'll see inspection reports that state, 'There is no way in two hours that we can tell you if you have mold. If you want to have the house tested for mold, hire someone.' "
J.C. Melvin, a real estate trainer and facilitator from Las Vegas, is also an advocate of risk management for real estate professionals.
According to Melvin, the smart agent -- at least one who is not going to end up testifying in court -- is the one who says, "I don't know."
But just pleading ignorance is not enough, Melvin said, because "I don't know" has to be followed by "If you have concerns, I would suggest that you hire a professional."
Roggow said she believes risk management in real estate had its origins in 1985, when discussion began about disclosure of agency relationships (buyer's agent, seller's representative).
Before that, real estate was kinder and gentler, recalled Marilou Buffum, an agent with Eichler & Moffly in Chestnut Hill in Philadelphia and 2003 president of the Greater Philadelphia Association of Realtors.
"In the 1970s and early 1980s, we tried to answer as many consumer questions as we could about a house," Buffum said.
"Maybe we shouldn't have said as much as we did, but in those days people knew that we were acting in good faith."
Today, "you simply insist that the seller discloses everything and tells the complete truth, and if a buyer has a question about anything, the buyer seeks professional advice," Buffum said.
Does the agent's attitude sit well with the buyer?
"No," Buffum said. "Many of them think that we are not doing our jobs and become annoyed when we can't provide them with an answer. Selling real estate has become much more difficult and much more challenging."
Real estate is a relatively narrow field, "yet people assume that we know everything," she said. "You have to let them know up front the kind of information you are able to provide."
Melvin said the mold issue has pushed things over the top for real estate agents.
"Mold is quickly becoming one of the biggest sources of both litigation and liability in the real estate industry," he said.
And though mold has been around since the dawn of time, the issue is creating another major headache for an industry that has already weathered controversy over lead-based paint, asbestos and radon, to name just a few problems.
One byproduct has been the growing unwillingness of insurance companies to write new policies and their willingness to exclude coverage of mold from existing ones.
"When a real estate agent gets ready to list a house, he or she'd better be sure that the property and prospective buyers are insurable," Roggow said.
If a seller makes insurance claims against his homeowner's policy and does not disclose it, the property may be uninsurable.
If the seller's house is in order, but the buyer has a history of claims that he or she does not disclose, coverage may be denied, and a settlement cannot go through.
"Before you list a home, run the seller and the buyer through CLUE to see if they are insurable," she said.
CLUE, or Comprehensive Loss Underwriting Exchange, is how insurance companies weed out potentially troublesome customers.
The computerized database of claims made by consumers has been around since the late 1980s and was little used in the 1990s. Now, however, CLUE is used by about 90 percent of underwriters.
The CLUE report (www.choicepoint.com) and an insurance scoring system are used to decide how likely a homeowner is to file a claim against a policy.
Bob Bass, a Phoenix real estate lawyer, said the number one source of litigation in home transactions has been the "failure to disclose property defects."
"The era of 'caveat emptor' is over," said Marie Spodek, a real estate consultant from David City, Neb. "Under 'caveat emptor,' agents were able to stick their heads in the sand. Now they need to spend more than a couple of minutes convincing the seller that his or her failure to disclose such defects will come back to haunt them."
Another problem that real estate agents face is having to deal with work not done by professionals.
"A home inspection and a subsequent survey by a roofer discovers that the house needs a new roof, and the seller agrees to have a new one installed," Roggow said. "Just saying that a new roof will be installed isn't enough. A pickup truck, a barrel of shingles and two six-packs of beer don't make a roofer.
"Roofing by a professional who provides a guarantee for his work should be specified in writing," Roggow said.
Should a real estate agent be present for a home inspection?
"Absolutely not," Roggow said. "Your job is to protect the transaction."
In New York, agents are not permitted to come on the inspection, she said. In Lincoln, Neb., real estate agents also are not welcome, but the inspector brings all the parties together at the end of the inspection to hear the report.
"If you are part of the inspection, and the buyer asks you afterward what you heard, you are being asked to provide your interpretation of what actually transpired," Roggow said.
Agents are asked to explain so much, and, as Buffum points out, there is something that makes many of them want to be helpful beyond their expertise.
Buyers may want to know whether there is a high incidence of crime in the neighborhood, Roggow said. She said the agent should say nothing except provide telephone numbers for the police department.
What about the presence of convicted sex offenders in the neighborhood?
She said the agent should provide a Web site but should not keep a list of sex offenders, even if he or she does not make it available, because "the law says that if one agent in an office is in possession of such a list, all agents are deemed to have it as well."
Referrals can tend to create litigation problems.
"You can't say, 'Use this person,' or hand them the Yellow Pages," Roggow said. "What you can do is give them a list of inspectors, appraisers and others who work in your area or with whom your firm has done business and found to be satisfactory."
Appraisers are a touchy area because if an agent recommends an appraiser and the buyer or seller has problems with the appraisal, the agent gets the blame.
Home inspectors have long recognized that theirs is a risky business.
Before a home inspector begins work, he or she is required to provide a list of what the inspection will entail, so there will be no misunderstandings or lawsuits.
For example, the National Association of Home Inspectors excludes inspections for termites or termite damage, indoor air quality, or the potential (including mold) for the indoor air to cause illness, and states unequivocally that the inspection and report are based on "visual observation of existing conditions of the property at the time of inspection."
So the report is not a guarantee. Nor will the inspector be liable for any repairs or replacement of the inspected property or its contents.
The best course of action is to demand that everyone in the transaction be completely candid.
"I'm a big proponent of full disclosure," Buffum said. "Unfortunately, not every agent is."