Real Estate Agency Law - Fiduciary Duties are Like an OLD CAR

Row of houses with for sale signs in front of them
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A true "agent" as designated by a written agency agreement, has certain additional duties legally required and for which the agent can be held liable if violated or not performed as required.  To help you to remember them, use the acronym OLDCAR.

Obedience:

As an agent of your client, you must obey their instructions. That's only if their instructions are not illegal and are in accordance with the contract.

An example would be a deal in which you are the agent of the seller. You have two offers to buy their property and they're almost identical in price and contingencies. Your seller instructs you to accept the offer from Agent B without going back to both buyer agents for further offers because your seller "doesn't like Agent A". Though you may feel that it is unfair to Agent A and their buyer, you must obey the instructions of your seller.

However, should the seller instruct you to not consider one agent's offer because the buyer is of a certain ethnicity, that's illegal.  You do not, nor should not, follow that instruction.

Loyalty:

As the agent for your client, you must be loyal and keep their best interests ahead of those of any other party, including yourself. How much commission you might make, particularly in competing offer situations, should not be a consideration and would be disloyal to your client.

One situation where this is of concern is the offer of a bonus to buyer agents if an offer is accepted.  In no way should the buyer agent give preference to that property because of the bonus.  It is acceptable to show the property to the buyer, but ethics would require telling them about the bonus.

 I always refunded any bonus over regular commission to my buyer (legal in the state).

Though confidentiality is discussed separately, it is also a component of the loyalty piece. Disclosing anything about your client without their express consent would not be in keeping with this loyalty requirement.

Disclosure:

In many states the law requires a real estate agent, whether in an "agency" capacity or not, to disclose material facts to their client. Material facts are those that, if known by the buyer or seller, might have caused them to change their purchase or sale actions.

Beyond that, the fiduciary duty of disclosure would include just about any knowledge the agent had that might benefit their client in the process. If working for the buyer, and you knew the seller was in a financially stressed situation, you would disclose that to help your buyer in the negotiation.

Confidentiality:

Your fiduciary duty of confidentiality means that you do not disclose anything that you learn about your client, their business, financial or personal affairs or motivations. This duty survives closing and lasts forever. Only a court instruction to disclose can relieve you of this duty.

Accounting:

Accounting for all documents and funds in the transaction is a fiduciary duty.

Accurate reporting of the whereabouts of all monies pertaining to the transaction and their ultimate disposition is a fiduciary responsibility.

Reasonable Care:

This duty is one to be very careful of. The words "reasonable care" are only finally fully defined in many cases by a judge or jury when it's too late to change your actions. You, as a licensed real estate professional, are expected to have a certain level of knowledge and be able to advise and guide your client through the process without harm.

Whether on the buyer or seller side, you are expected to advise on price, inspections, negotiations, repairs and many other facets of the transaction. If it's not something you're expected to know, you are expected to advise your client in how to get the information.

Know Your Fiduciary Duties as an Agent and Perform them Diligently:

Note that the first letters of the duties listed spell out OLD CAR, so it's easier to remember.

Over many years, common and statutory laws have evolved as regards agency and fiduciary responsibilities. As real estate representation evolves, there are new court cases every year in many states that add to the expectations of our clients and courts.

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.