A Realtors Fiduciary Duty
Before we talk about a Realtors fiduciary duty to their client, it makes some sense to discuss what exactly is a fiduciary and who is the client.
A simple definition of a fiduciary is someone that by law has to put the client's well being ahead of their own.
The client is the home buyer or home seller that has contracted with the Realtor to represent them.
For instance a home is listed for sale and you contact the Realtor to view the property. If you like the property and wish to make an offer on the home, there is a good chance the Realtor that listed the home will happily help you with the transaction if you aren't working with another Realtor already. This is because the Realtor will get paid by the home seller twice. Once for selling and once for finding the buyer.
If you are not that Realtor's client, you are his customer. Realtor's owe a fiduciary duty to their clients, not their customers.
Another example would be a sales person at a new home development. While it may seem like they are representing you to buy the
home from the builder, that is not the case at all. They are representing the builder. That sales person is not a fiduciary
A Realtors Fiduciary Duty Spelled Out
The first requirement of the Realtors fiduciary duty to their client is to be LOYAL. This means at all times the client's best interest must be first and foremost. The client's interests are ahead of the Realtor, and their broker's interests.
Consider for a moment an offer by your Realtor to purchase your home. If that Realtor then immediately puts the home back up on the market and sells for a profit, the Realtor has not been loyal. Obviously they saw an opportunity to not get you the best price for your home and instead made a profit at your expense.
A Realtor must be OBEDIENT. Basically a Realtor must obey all legal instructions within the boundary of the agency relationship promptly. Having said that, the Realtor can not do anything illegal. Examples would be to hide disclosing a material fact about the home, or not showing the home to minorities.
A Realtor must DISCLOSE. This is often times confusing and is confused by many Realtors. A longer description is necessary.
A Realtor must always disclose anything about the property to their client that they know, hear, come across, infer, etc. For instance let's say I am representing you as the seller of a property. Another Realtor calls and tells me his client is willing to pay full price for your home, but is going to offer $20,000 less as a starting point. I am obligated to tell you what the Realtor said about the buyer willing to pay full price. You, the seller, are my client and I am obligated to disclose this type of information to you.
Realtors are bound to the principle of honesty. This means that we must disclose to the public (people that aren't our clients) anything about the physical condition of the property that would affect the sale. An example would be that the irrigation system is leaking, or that the air conditioner doesn't work properly.
A Realtor is obligated to offer his client CONFIDENTIALITY. Again if I am your Realtor representing you in the selling of your home, I am forbidden to disclose to a potential home buyer that the seller is getting divorced, or in financial troubles, or needs a quick sale, or anything that may hinder the seller from receiving the best possible price.
Often times Realtors will disclose these facts so that the home will sell quickly and they will get paid a commission. In the example for disclosure where the Realtor told me that his client was willing to pay full price he was breaking the rule of confidentiality.
Confidentiality is nearly the opposite of disclosure. A Realtor must disclose items to his client, but must keep their client's business confidential from the public.
A Realtor must offer his client REASONABLE CARE AND DILIGENCE. A Realtor is expected to be knowledgeable to represent the seller or buyer in matters related to the real estate transaction. A Realtor is not expected to be an accountant, engineer, attorney, or offer service beyond the scope of their real estate license.
The last requirement of the Realtors fiduciary duty to their client is to provide an ACCOUNTING of the transaction. We must safeguard any money and documents that are entrusted in our possession during the transaction.
As you can see a Realtors fiduciary duty to their client is quite extensive. I have seen too many real estate agents not comply with the Realtors fiduciary duty to their clients and many clients are hurt by it. If you are interviewing a Realtor it may not be a bad idea for them to explain what their fiduciary duty is to you. If they can't answer the question well, you may want to interview someone else.
I hope that clarifies why you would want a Realtor to represent you in the purchase or sale of your home. If you are my client I have a fiduciary duty to represent your interests before any others, including my own.
Contact me if you have any questions.
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