Real Estate Representation
Why the Fiduciary Duties of a Real Estate Agent are Important for the Consumer?
One of THE largest transactions for the Average Person on the planet is the Real Estate transaction. It is the most money most people will ever see outside of a healthy retirement savings account. And finding someone to assist you in navigating the ins and outs of the process is extremely important. Let’s review the fiduciary duties that a real estate agent should follow:
Accounting
Real Estate Agents are obligated to account for all money or property belonging to the client that is entrusted to the agent. This includes safeguarding any money, deeds, property, or other documents entrusted to the agent that relate to the transaction or affairs.
Reasonable Care and Diligence
Real Estate Agents undergo A LOT of training, just by having the Real Estate license an agent is deemed to have skill and expertise in real estate matters superior to the Average Person. When agents represent others, they are supposed to use their superior skills and knowledge to the benefit of their clients. This includes discovering facts regarding the client’s affairs that a reasonable and prudent Real Estate Agent would be expected to investigate. This is the same duty that doctors or lawyers owe to their patients or clients.
Confidentiality
Real Estate Agents are obligated to safeguard client’s confidence and secrets. Agents are supposed to keep confidential any information that would weaken the client’s bargaining position if it were revealed. Unless permitted by the client, this includes if the seller would take a lower price than what is listed and whether the buyer could purchase the property for more.
EXCEPTION: There is no obligation to keep confidential material facts concerning the condition of the property or misrepresent the property’s condition. Doing so will constitute misrepresentation and would impose liability on both the broker and seller.
Obedience
Real Estate Agents are obligated to obey promptly and efficiently all lawful instructions of the client. However, this duty does not include an obligation to obey unlawful instructions. Compliance with instructions the agent knows to be unlawful could constitute a breach of an agent’s duty of loyalty (see point 5).
Loyalty
Real Estate Agents are obligated to act at all times SOLELY in the best interest of the client to the exclusion of all other interests, including the agent’s self-interest. This also includes steadfastly avoiding any conflicts of interest that might compromise or dilute the agent’s undivided loyalty to the client’s interests. Thus, agents should avoid anything that competes with or is adverse to, their client’s interests.
Disclosure
Finally, Real Estate Agents are obligated to disclose to the client all relevant and material information that the agent knows and pertains to the scope of the agency.
This obligates the agent of a seller to reveal to the seller:
All offers to purchase the seller’s property.
The identity of all purchasers.
Any facts affecting the value of the property.
Information concerning the ability or willingness of the buyer to complete the sale or to offer a higher price.
The agent’s relationship to, or interest in, a prospective buyer.
A buyer intends to subdivide or resell the property for a profit.
Any information that might affect the seller’s ability to obtain the highest price and best terms in the sale of the client’s property.
This obligates the agent of a buyer to reveal to the buyer:
The willingness of the seller to take a lower price.
Any facts relating to the seller’s urgent need to dispose of the property.
The agent’s relationship to, or interest in, the seller of the property for sale.
Any facts affecting the value of the property.
The length of time the property has been on the market.
Any offers or counteroffers that have been made relating to the property.
Any other information that would affect the buyer’s ability to obtain the property at the lowest price and most favorable terms.
EXCEPTION: Treating the public honestly and fairly does not depend on the existence of an agency relationship. Honesty and fairness are the two factors that are allotted to the public as a Real Estate Agent. Therefore, a Real Estate Agent must disclose known material facts concerning the value of the property to the public.
Ending Thoughts
The fiduciary duties that are espoused with being a Real Estate Agent are very important. They bring a level of trust to the public and clients that should be the minimal expectations when dealing with a Real Estate Agent. It is vitally important that clients find Real Estate Agents that will live up to their Fiduciary Duties. In my opinion, this should be a subject of conversation as you are interviewing Real Estate Agents. See what they know about the subject.