Vicarious Liability

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Definition: Vicarious liability is the responsibility of one for the acts of another. In the real estate business, this would be the case when a listing or buyer broker is an "agent" of the seller or buyer. The client can be held responsible for the actions of the broker agent if they have knowledge of an improper or negligent act.

In the not-so-common situation of sub-agency, the buyer's agent is working as a sub-agent of the sellers listing broker, and owes fiduciary duties to the seller rather than the buyer with whom they're working.

In this situation, the seller and their broker could be held liable for the actions of the buyer agent.

Vicarious Liability Comes with Agency - All About Agency

There aren't many transactions these days with the real estate professional actually acting as an agent of their customer (client).  Here are some articles that can help you to understand agency.

How Agency is Created:  Express agency is created by either an oral or a written agreement between the principal and the agent. It indicates their express intent for this representational status.

In real estate, agency is normally created by either a written listing agreement with a seller, or a buyer agency agreement with a buyer. Some states allow verbal agreements, but most do not.

Forms of Client Representation:  Most all the states require some form of disclosure to the client or prospective client as to how you will be representing them in their real estate transaction.

Be sure that you understand your state's rules and the various ways in which you can be their representative. Your duties and obligations to the client will vary significantly based on the type of representation to which you've contractually agreed.

Real Estate Agency Law:  Know the laws in your state that pertain to when you are an "agent" and when you are not.

When you are, know what's required of you and carefully and diligently try to perform accordingly. Don't try to offer advice or services for which you are not qualified, but know that there have been court rulings that indicated the real estate professional should have known where to send the client for the information they needed.

A fiduciary is generally a person you trust. A fiduciary relationship is formed between two parties who trust each other. The trust typically has to do with assets, money or property.

In real estate, a fiduciary relationship is created between a real estate agent, known as the fiduciary, and a buyer or a seller, known as the principal. A buyer's agent, for example, works on behalf of the buyer and must hold that buyer's interests above the interests of the agent. That trust created requires the highest standard of care and loyal treatment to the buyer.

Remedies for Breach of Fiduciary Duties:  First, understand that fiduciary duties are required only if the real estate professional is acting in an "agent" capacity.  While they may all be called real estate agents, the fact is that very few deals these days involve a real estate agent actually acting as an agent.

Agency Relationships in Real Estate:  Buyers and sellers of real estate are often confused about the role of real estate agents, whom the agents represent and real estate agency relationships. Many states require that agents give buyers and sellers an agency disclosure form to sign.

This form is not an agreement; it is a disclosure. It disclosures the various natures of possible agency relationships, and it is important that you read it to be better prepared to select the type of agency relationship you want.

In my vacation home practice, I had a number of attorney buyer customers, as well as a couple of judges.  None of them wanted me to be their agent, they definitely would not have let me if I wanted.  That's due to vicarious liability.  Should I make a mistake, they didn't want it backing up to them.

 Agency is slowing dying out in real estate, with most of us practicing transaction facilitation.