SAFEGUARDS

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Risk Management for Real Estate Firms

QUICK SUMMARY

Risk is a fact of life in business. There are basic risks that apply to every business, but certain industries face unique risks in their field. Real estate agents, for example, as experts in a highly technical and regulated industry, must balance risks that are largely out of their control, such as price fluctuations, and credit availability, with liability risks associated with their role as professional advisors to clients and the competitive nature of the business.

Market and Economic Fluctuations

Real estate markets have always been cyclical, with prices moving up and down as broad-based economic factors impact the availability of credit, and mortgage interest rates. Changing demographics also affect supply and demand, which can cause fluctuating revenue streams.

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Document Management

Real estate transactions generate piles of documentation. The sheer amount of paperwork required in every real estate transaction demands efficient document management, filing and archiving systems. One missing document, or unchecked box, could derail a transaction and lead to client damage claims and lawsuits.

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Per Se Antitrust Actions

Competition in local real estate markets can sometimes lead to anti-competitive actions on the part of overzealous agents. Per se offenses (anticompetitive actions that do not conform to federal antitrust statutes) in the real estate industry include fixing prices or commissions, controlling listing lengths, and any group collusion to treat a competitor differently. Violations can lead to significant penalties.

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