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Home Buying Process
Standards
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Buyer's Agent
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Duties
Of A Real Estate Agent
A real estate broker who becomes an agent of a seller
or buyer is deemed to be a fiduciary. Other examples of fiduciaries
are trustees, executors, and guardians.
As a fiduciary, a real estate broker is held by law
to owe specific duties to his/her principal (the person who they are representing),
in
addition to duties or obligations set forth in a listing agreement,
buyer representation agreement, or other contract of employment. Subagents
of the broker also owe the same fiduciary duties to the broker's principal.
These specific fiduciary duties include:
Loyalty
One of the most fundamental fiduciary duties an
agent owes to the principal. The duty obligates a real estate broker to
act at all times, solely in the best interests of the principal, excluding
all other interests, including that of the broker.
An example of breach of loyalty is when a broker
purchases a property listed with his/her firm, and immediately resells
it at a profit. Such conduct is usually considered appropriate and lawful
by persons who act at arms length, but a fiduciary would be considered
to have stolen an opportunity for profit that rightfully belongs to the
principal.
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Sellers
Agent |
Exclusive
Buyer's Agent |
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Must do everything possible to gain
an advantage for the Seller. |
Must do everything possible to gain
an advantage for the Buyer. |
Obedience
An agent is obligated to promptly and efficiently
obey all lawful instructions of his/her principal that conform to the purpose
of the agency relationship. However, the duty does not include an obligation
to obey unlawful instructions, such as instructions to not market a property
to minorities or to misrepresent the condition of a property.
Disclosure
An agent must disclose to the principal all known
relevant and material information that pertains to the scope of the agency.
The duty includes any facts affecting the value or desirability of the
property, as well as any other relevant information pertaining to the transaction,
such as the other party's bargaining position, the identity of all potential
purchasers, information concerning the ability or willingness of the buyer
to offer a higher price, any intent to subdivide or resell the property
for a profit.
An agent's duty of disclosure to his/her principal
must not be confused with a real estate broker's duty to disclose any know
material facts about the property valu
e to non-principals. The duty to
disclose known material facts is based on a real estate broker's duty to
treat all persons honestly. The duty of honesty does not depend on the
existence of an agency relationship.
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Sellers
Agent |
Exclusive
Buyer's Agent |
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Must reveal any known material
defects in the property.
Must NOT reveal information about traffic
problems, poor school system, declining property values, etc. since these
items might make the property less desirable to Buyers. |
Must tell Buyer everything
they can find out about the Seller including the motivation for selling
and any reasons the Seller may have for wanting a quick sale.
Must tell Buyer everything they can find out about
the property, including traffic problems, poor school system, high crime
rates, etc. |
Confidentiality
An agent is obligated to safeguard his/her principal's
lawful confidences and secrets. Therefore, a real estate broker must keep
confidential any information that may weaken a principal's bargaining position.
The duty of confidentiality precludes a broker who represents a seller
from disclosing to a buyer that the seller can, or must, sell a property
below the listed price. Conversely, a broker who represents a buyer is
prohibited from disclosing to a seller that the buyer can, or will, pay
more than what has been offered for a property.
The duty of confidentiality does not include an obligation
by a broker who represents a seller to withhold know material facts about
the condition of the seller's property from the buyer, or to misrepresent
the property's condition. To do so constitutes misrepresentation and impose
liability on both the broker and the seller.
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Sellers
Agent |
Exclusive
Buyer's Agent |
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Must tell the
Seller everything they can find out about the Buyer, including all financial
details they can obtain.
Must conceal anything about the Seller that would
help the Buyer gain an advantage, such as impending foreclosure, need to
move in a hurry, need to sell to settle divorce, etc. |
Must keep all
information about the Buyer confidential, including the Buyer's ability
or willingness to pay more for the property than they are offering as well
as the Buyers motivation for buying. |
Reasonable
care and diligence
An agent is obligated to use reasonable care and
diligence when pursuing the principal's affairs. The standard of care expected
of a buyer's or seller's real estate broker is that of a competent real
estate professional. By reason of his/her license, a broker is considered
to have skill and expertise in real estate matters superior to that of
the average person.
As an agent who represents others in their real estate
dealings, a broker or salesperson is under a duty to use superior skill
and knowledge while pursuing the principal's affairs. However, no broker
is expected to perform tasks or know information outside the scope of his/her
real estate license. Real estate licensees are not expected to perform
services normally provided by engineers, lawyers, accountants, or other
professionals. If concerns arise outside the scope of a broker's responsibility,
the broker should acknowledge that and suggest that the principal seek
assistance from a reliable outside source.
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Sellers
Agent |
Exclusive
Buyer's Agent |
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Must prepare
themselves through education and study to competently represent the Seller
in all matters. |
Must prepare
themselves through education and study to competently represent the Buyer
in all matters. |
Accounting
An agent is obligated to account for all money or
property that belongs to his/her principal entrusted to that agent. The
duty compels a real estate broker to safeguard any money, deeds, or other
documents entrusted to them relative to their client's transactions of
affairs.
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Sellers
Agent |
Exclusive
Buyer's Agent |
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Must account
to Seller for any money or documents entrusted to them. |
Must account
to Buyer for any money or documents entrusted to them. |
Whether a principal is a buyer
or a seller, an agent always owes that person the above six fiduciary duties.
These duties are inherent in all agency relationships and enforced by all
courts of law in the United States.
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