23) RECP Chapter 23 Risk Management [In Progress]

real estate risk management strategies

Four means of mitigating risk:

-Avoidance (elminiation)

-Reduction (mitigation, sharing)

-Transference (outsourcing, insuring)

-Retention (acceptance and budgeting0

real estate risk avoidance

Refraining from activity that carries risk; nearly impossible in real estate practice (ex. a broker only hiring experienced affiliates--though this does not entirely eliminate the chanfe of law violations)

real estate risk reduction

Taking steps to reduce the probability or the severity of a potential loss, such as through sharing responsibility (ex. an agent provides a customer with expertise but allows them to decide how much to offer)

real estate risk transference

Passing the risk to another party by contract or other means, commonly through an insurance policy (Errors & Omissions insurance), but can be additionally supported through the language of a sales contract

real estate risk retention

Entering into an activity, in spite of known risks, and taking responsibility for correction and consequences; only done with risk cannot be reduced/transferred, and one has decided to not avoid it because of potential benefits (ex. a landlord repairing a leaking pipe themselves)