How Transaction Coordinators prevent lawsuits explained here saves you money. That’s right, a Transaction Coordinator (TC) reduces errors and omissions to avoid lawsuits.

Real estate transactions depend on proper documentation to work successfully. Carefully tracking and storing essential documents in a real estate transaction reduces legal risks.


Example of Null and Void Real Estate Transaction

The scourge for every real estate agent: “Buyer’s Remorse”. A sense of regret a buyer feels after making a real estate purchase. Most often, it occurs before the escrow closes. But, many times it occurs after escrow closes. This creates big problems for real estate agents (along with the sellers).

For example, if a real property buyer becomes unsatisfied with the purchase, claiming that important signatures never occurred or were forged can cause a lawsuit to declare the purchase null and void. The only way to defend the lawsuit requires proving all necessary signatures legally occurred. The proof lies within the documents.

Let’s say someone intentionally hid an important document. Missing documents often result in a court judgment voiding the purchase. In addition, if an essential signature was a forgery the court voids the purchase.

What happens if a court declares a property purchase null and void? Everything returns to the position all parties held before the sale occurred. That means the seller still owns the property. It also means that all brokerage commissions return to whoever paid them.

Errors & Omissions (E&O) Insurance Coverage

But, won’t the Errors & Omissions (E&O) insurance policy save your commission? Probably not. Exceptions exist. Let’s explore what E&O actually covers.    

According to Investopedia, E&O professional liability insurance protects against claims by policyholders for “inadequate work or negligent actions”. This means work and/or actions performed by the insured, not other parties.

In the above example, the alleged forgery or failure to collect every essential signature on an important document hopefully didn’t occur with you in your performance as a real estate agent in the transaction. In reality, someone else’s forgery or negligence killed the deal.  

What isn’t covered by E&O insurance? Insureon, a commercial insurance agency ranked within Insurance Journal’s Top 100 Property / Casualty Agencies in 2017, answers this question. E&O insurance does not cover:

  • Illegal acts (such as forgery, a crime); and
  • Intentional harm or wrongdoing (like hiding documents on purpose).

Therefore, through no fault of the real estate agents, the entire sale becomes null and void resulting in refunding all brokerage commissions. It’s a bummer if you have to return your hard-earned commission.

The Risks of Real Estate Transactions

Keep in mind, the above example is just one situation of how a completed real estate transaction fails. Other similar scenarios often occur nationwide.

The very nature of the real estate business leaves agents and brokers exposed to risks.

While E&O insurance is worth having, it isn’t the solution to every transaction problem. That’s why you need further protection against real estate transaction risks.

The Solution to Real Estate Transaction Risks

The example above contained two risks: forgery and intentional wrongful acts.

Forgery avoidance requires a Notary Public to witness the signatures and attest to the fact that the signatures were placed by the actual person. In addition, the notary attaches his or her official seal to the document along with signature and attestation.

Willfully hiding a document avoidance requires creating and following a system tracking every required document to a transaction.

As a real estate agent, do you ensure forgeries don’t occur and documents never go missing in every transaction? Of course not, because it’s not your job.

So, who makes such assurances and track every document in a transaction?

The Role of Escrow Officers in a Real Estate Transaction

Escrow officers aa neutral third parties assist with the completion of real estate transactions. Their typical tasks include holding and disbursing buyer’s and lender’s funds, preparing escrow instructions, preparing title documents, and obtaining required signatures for documents.

However, escrow officers’ duties are limited. According to real estate lawyers, they must be:

  • Loyal;
  • Make full disclosures;
  • Exercise a high degree of care to protect the funds held in escrow; and
  • Pay all entitled parties at closing.

What Escrow Officers Don’t Do?

Don’t expect escrow officers to chase down documents. While escrow officers inform buyers, sellers, lenders, and agents of the required documents; they can’t be expected to physically seek and obtain essential documents to close escrow.

Every party to a real estate transaction must perform certain duties to enable escrow to close. For instance:

  • Sellers provide required property disclosure statements;
  • Buyers apply for a mortgage unless it’s an all-cash purchase;
  • Buyers obtain homeowners insurance;
  • Lenders provide documents indicating loan approval and disburse funds;
  • Inspectors hired by the buyer submit their reports; and
  • Buyers and Sellers review and accept the HUD-1 form and pay their closing costs.

But, what if one or more of these parties simply don’t perform their duties? It’s not the escrow officer’s job to chase them down to make them perform their duties. If one party fails to perform, the escrow never closes. Commissions don’t get paid.

Why Transaction Coordinators Help Escrows Close

How Transaction Coordinators prevent lawsuits explained here shows the importance of preserving documents. 

How a TC helps escrows close? By tracking down essential documents, obtaining important signatures, making sure all parties meet their deadlines, and safely storing the documents. 

Therefore, hiring a TC saves the day in the following three ways:

  1. The TC verifies that all signatures and initials appear where they should on all documents.
  2. Making sure all parties meet their deadlines to make the real estate transaction continue towards closing is the TC’s job.
  3. In addition, storing all important documents in case they are needed in the future is another job for the TC.

Legal experts say, maintaining well-documented files is the best way to avoid claims and lawsuits. Saving and maintaining important documents like title searches, inspection reports, letters of intent, contracts, etc. in a secure place provides proof to stop potential claims from getting started.

Minimize post-closing claims and lawsuits. Hire a TC to ensure all of the essential documents for a real estate transaction obtained, securely stored, maintained, and readily available to meet all claims.

Contact Us to learn more about how a TC helps all of your transactions proceed smoothly and conclude with a successful closing.

Steven Rich, MBA – Guest Blogger


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