What Is Vicarious Liability?

Vicarious liability in real estate is something that every agency or brokerage should be aware of, as it can affect its financial wellbeing. If an agent that is working for the company is found guilty of misrepresentation in any way, not only can the agent be held liable, but the agency as well, even if there was no prior knowledge of the transgression.

Agent Representation

Real estate agents can work in three ways when it comes to whose interests they are representing:

  1. Directly with either the buyer or the seller.
  2. As an agent for both parties, buyer and seller.
  3. As a sub-agent for the seller.

However the agent is working, there must be full disclosure, as well as confidentiality and accountability to the buyer and/or seller, depending on the situation. In particular, when the agent is working for both buyer and seller or as a sub-agent, it is difficult to handle the transaction in a way that everyone is happy.

Misrepresentation Ramifications

When the buyer or seller feels that there was a misrepresentation, the agent may be found liable of misconduct. Even if agents are working as independent contractors, the agency is still considered responsible for how they represent the transaction. For this reason, experts recommend that the company protect itself with insurance that covers vicarious liability in real estate.