Common risks in real estate and how to cover them effectively

Real estate is a dynamic sector offering numerous opportunities, but it is also fraught with risks, particularly for professionals in the field. Identifying these risks and knowing how to protect oneself is essential to ensure the longevity and profitability of any real estate activity. This article explores the most common risks for real estate professionals and proposes strategies to cover them effectively.

Obligations of real estate agents

Before addressing the risks, it is important to recall the obligations incumbent upon real estate agents.

They must comply with a set of strict rules to practice their profession. According to the DGCCRF, they must notably:

• Hold a professional card issued by the Chamber of Commerce and Industry.
• Take out a financial guarantee and professional liability insurance.
• Respect information and transparency obligations towards consumers, particularly regarding advertising and pricing.

Financial risks

Non-payment of fees

Real estate agents may face situations where transaction fees are not paid, which can affect their cash flow. To protect against this risk, it is recommended to:

• Establish clear contracts with well-defined payment clauses.
• Use collection services in case of non-payment.

Market fluctuations

Variations in real estate prices can impact the profitability of transactions. To manage this risk:

• Diversify your services to spread the risks.
• Regularly analyze the market to anticipate trends.

Legal risks

Construction defects and erroneous information

Hidden defects and incorrect information about a property can lead to disputes. To avoid these problems:

• Conduct thorough inspections before any transaction.
• Ensure the accuracy of the information provided to clients.

The real estate agent has a duty to advise and must ensure the regularity of the transaction and transmit all necessary technical information.

In the specific case of hidden defects, their liability will be engaged if it is proven that they had knowledge of the information or if a meticulous inspection of the property would have shown the presence of these defects.

Failure to meet legal obligations

Laws, such as the ALUR law, impose obligations on real estate professionals. Failure to respect them can lead to sanctions. To protect against this:

• Stay informed about legislative changes.
• Undergo continuous training to stay up to date on legal obligations.

Professional Liability Insurance

Professional liability insurance is crucial to cover errors or omissions committed within the framework of professional activity, which could cause harm to clients. To protect oneself:

• Take out professional liability insurance that covers damages unintentionally caused to third parties.
• Implement internal procedures to minimize potential errors.

Tenant-related risks

Property damage and non-solvency

Damage caused by tenants and the selection of non-solvent tenants can harm profitability. To mitigate these risks:

• Strictly screen your tenants.
• Take out unpaid rent and property damage insurance.

Risk coverage strategies

To effectively cover these risks, real estate professionals can use GALIAN or other specialized insurers that offer solutions tailored to the needs of professionals in the sector.

It is also advisable to collaborate with legal experts to ensure that all legal aspects are covered and to implement crisis management plans to react quickly in case of a problem.

Conclusion

Although the real estate sector is rich in opportunities, it is crucial for real estate professionals to understand and manage the various associated risks. By adopting appropriate coverage strategies and staying informed about market and legal developments, they can ensure the sustainability of their business.

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