Navigating Real Estate Risks: Fraud, Lawsuits, and AI Missteps Explained

The Rising Tide of Risk in Real Estate

In recent years, the landscape of real estate has become increasingly fraught with risk, a trend spotlighted at the National Association of Realtors (NAR) 2025 NXT conference. Here, real estate professionals were urged to take note of the escalating threats posed by fraudulent listings, greater error and omissions (E&O) claims, and the encroachment of artificial intelligence (AI) risks.

Understanding Listing Fraud: An Alarming Trend

One of the most pressing concerns highlighted during the conference was listing fraud, also known as seller impersonation fraud. With data indicating that between 15% to 25% of listings in various markets are fraudulent, the fallout from this issue can be catastrophic. Industry experts like Miguel Berger, from Property Shield, cite that in 2024 alone, listing fraud cost consumers a staggering $173 million. As fraudsters grow increasingly sophisticated in their tactics, Realtors are left vulnerable to public scrutiny and potential legal repercussions. Knowing that consumers often blame real estate agents for fraud can place an immense burden on professionals who may not even be aware fraudulent activity is occurring.

Spotlight on E&O Claims: A Growing Concern

Compounding these challenges, rising E&O claims threaten the financial viability of many real estate agents. Industry veteran Steven Stecker unveiled that his company paid out $37 million in claims last year, revealing not only an increase in claim frequency but also a significant rise in the severity of claims. The average real estate loss has surged by 60% over the last decade, largely attributed to social inflation and evolving consumer expectations. For agents, this increasing risk highlights the necessity of being proactive about risk management.

AI: Friend or Foe?

While AI technology provides advancements in customer service and transaction efficiency, it also introduces new vulnerabilities. The potential for AI-related fraud—such as deepfake technology enabling voice cloning or synthetic identity fraud—poses a serious challenge for real estate professionals. As pointed out by various sources, including Closinglock's recent findings, scammers are exploiting AI tools to craft increasingly believable scams that can imitate real people, raising consumer losses to astronomical heights. For example, a couple from California lost $720,000 due to a deepfake, showcasing the alarming reality that AI can be weaponized against unsuspecting homebuyers.

What Can Be Done?

In light of these risks, real estate professionals must adapt rapidly. AI can enhance operational efficiencies, but also necessitates better data security measures to protect client information and transactions. Solutions such as enhanced identity verification, training staff to recognize deepfake phenomena, and following best practice guidelines from reputable associations like ALTA are paramount in mitigating risk.

The Human Element: Power of Awareness

As technology evolves, the need for heightened vigilance and consumer education becomes critical. The reality is that human judgment remains an invaluable tool against fraud. Equipping agents with knowledge and resources to discern legitimate communications from fraudulent ones can serve as a robust first line of defense. Encouraging professionals to question and verify suspicious communications is crucial in maintaining trust within the industry.

As Realtors navigate the turbulent water of fraud, technology, and liability, they must remain engaged in proactive risk management strategies and be prepared to evolve alongside ongoing threats.

In conclusion, as these issues become increasingly defined, the real estate community must unite to address the complexities of modern transactions. This is not just about protecting business interests but safeguarding consumer rights and maintaining trust in our industry.