A real estate risk management plan outlines industry best practices. It includes safe open houses, client transparency, and staying informed about market conditions to mitigate common risks. Real estate agents are accountable for helping customers find their dream home.
However, real estate agents encounter a range of risks in their work, from contract agreements to private showings and open homes. Risks such as client injury during an open house or buyer lawsuit due to lost information can significantly impact your real estate business.
Here, we will discuss real estate risk management strategies.
BOMA Standards and Calculations
BOMA standards provide a constant and reliable way to measure commercial property rentable areas. Correct measurement is vital for defining rental, estimates, and operational charges. By confirming accurate measurements, BOMA calculations decrease the risk of disagreements and arguments associated with space consumption and rental contracts.
BOMA calculations improve transparency in real estate dealings by providing vibrant and standardized measurements that all parties can believe in. Open and honest dealings lessen the possibility of miscommunication, conflict, and legal action, strengthening the real estate market’s general integrity.
Workman’s Compensation
If you’re a real estate agent handling a team of real estate experts, you are responsible for maintaining and protecting your team. Have you measured what may occur if one of your team injures themselves in the sequence of their work? Are you following your state’s workmans compensation laws?
Workman’s compensation is a legal system that compensates employees injured or affected by work-related illnesses during their employment. This comprises missing salaries throughout their recovery period, disability expenses, medical and rehabilitation expenditures, and even reskilling. In the tragic event that an employee dies at work, the worker’s worker’s family may be eligible for benefits.
Workman’s compensation is administered mainly by public rules. Employers pay compulsory aid to maintain suitable handling. A claim is a request for benefits, treated similarly to an insurance claim. In this situation, the employee is not suing their employer.
Get the Correct Insurance for Business Driving
Real estate experts are often on the road, travelling to exposed houses, customer dwellings, or their brokerage’s office. However, if you trust your particular auto insurance policy, you may not be covered if you get into an accident during work.
As part of your real estate risk management strategy, you should buy the correct form of insurance coverage. Using your private car to manage your business may require hired and non-owned auto insurance (HNOA). Your business vehicle insurance should cover it if your brokerage owns the vehicle you drive for work.
Hired, non-owned, and commercial auto insurance will cover injuries or property damage in an accident. The incorrect insurance type can result in significant expenses such as legal fees, medical bills, or property repairs.
Consider Fractional Ownership to Reduce Liquidity Risk
Real estate is typically watched as an illiquid asset because it is not frequently easily liquidated. If the budget is declining, there may not be a good number of potential customers. In these situations, you may have chosen to undersell the asset or hang onto the property.
However, to avoid under-selling losses, consider incorporating fractional ownership, which allows you to own a specific percentage of an asset. It also allows you to realize profits by selling them. Fractional ownership ensures no net loss and provides additional financial sources for immediate needs, ensuring there are no net losses.
Portfolio Diversification
The best risk-managing method is to diversify your real estate investment portfolio. The text advises investing in diverse property categories, areas, sites, and markets to mitigate market risk and protect all investments simultaneously.
For instance, you may incorporate some investments in residential real estate into commercial real estate. Diversification across several asset types is another option. These methods lessen your vulnerability to sudden changes in the market, averting significant losses.
