On the Exclusive Buyer-Broker Agreement under the section titled “Agency Relationships” we see the following sentence: “As Agents for the Buyer, the Buyer’s Agent and Broker have fiduciary duties to the Buyer that include loyalty, obedience, full disclosure, confidentiality, reasonable care, and any other duties required by law.” When we represent the seller we see the following: “As agents for the Seller, they have fiduciary duties to the Seller that include loyalty, obedience, full disclosure, confidentiality, reasonable care, and any other duties required by law.”
Finally, here’s what the state law states regarding fiduciary:
An individual licensee shall uphold the following fiduciary duties in the course of representing a principal: loyalty, which obligates the agent to place the best interests of the principal above all other interests, including the agent’s own; obedience, which obligates the agent to obey all lawful instructions from the principal; full disclosure, which obligates the agent to inform the principal of any material fact the agent learns about: the other party; or the transaction; confidentiality, which prohibits the agent from disclosing, without permission, any information given to the agent by the principal that would likely weaken the principal’s bargaining position if it were known, but excepting any known material fact concerning: a defect in the property; or the client’s ability to perform on the contract; reasonable care and diligence; holding safe and accounting for all money or property entrusted to the agent; and any additional duties created by the agency agreement.
Allow me to go through each section of this paragraph to share some of my thoughts.
Loyalty, which obligates the agent to place the best interests of the principal above all other interests, including the agent’s own.
To make it clear. The interest of the client is more important that your own personal interests. Even though it is sometimes hard this is imperative. I’ve heard the term “commission breath” used for agent that are more interested in the commission than the client. Take care of your clients interests first and you will be rewarded handsomely.
Obedience, which obligates the agent to obey all lawful instructions from the principal.
The key here is all lawful instructions. Let’s say a buyer wants you to provide them information on how many people belong to a certain church in the neighborhood. We know this is against Equal Housing laws so we can’t provide that for them. If it’s something lawful, and it usually is, then you need to obey their request.
One example of obedience that I came across recently is a husband and wife who are buying a home but only the husband will be on title and is the only one that signed the Buyer-Broker Agreement. Initially, I sent all MLS listings to the husband and wife and would email them both, but the husband requested that I send nothing to the wife and all communication be with him only. Technically, he was my only client so I needed to obey that direction, and I did.
Full Disclosure, which obligates the agent to inform the principal of any material fact the agent learns about: the other party; or the transaction.
This is pretty self explanatory. Let me give an example that I’ve seen overlooked. You are under contract and the other agent states they will be sending over an addendum seeking a settlement extension. My opinion is you should let your client know within an hour of the conversation what was discussed. I see to many agents wait for the written and signed addendum to be sent to them before communicating anything to the client. A verbal conversation may not change the transaction but that is something your client should have a knowledge of if it’s a material fact.
Confidentiality, which prohibits the agent from disclosing, without permission, any information given to the agent by the principal that would likely weaken the principal’s bargaining position if it were known, but excepting any known material fact concerning: a defect in the property; or the client’s ability to perform on the contract.
This one also seems self explanatory. We don’t provide extra information and weaken our clients ability to negotiate. Keep most of the information you know about your client guarded.
When representing a seller DO NOT GIVE THEM ADVICE ON HOW TO COMPLETE THE SELLER DISCLOSURES, but at the same time you need to review the disclosures to see if a known material fact has not been disclosed. Honestly, have them disclose anything and everything. If the seller asks you your opinion you point them to the first paragraph of the sellers disclosures and recommend they disclose everything. You are not allowed to keep defects in the property confidential.
Another example of confidentiality being violated is when Earnest Money is not turned in on time per the Real Estate Purchase Contract. This would mean your buyer is in default and so if the client’s ability to perform on the contract. You MUST disclose to the other agent if earnest money is not received and deposited on time. You would also be required to disclose immediately to the listing agent if the earnest money bounced.
Reasonable Care and Diligence.
In my opinion reasonable care would be addressing all the areas of concern when writing a contract and protecting the earnest money. This would be done by letting the client know a day or two before earnest money becomes non-refundable that their last day to cancel is that date.
Holding safe and accounting for all money or property entrusted to the agent.
When you receive the earnest money you need to turn in into the office within 24 hours. This is our company policy.
Any additional duties created by the agency agreement.
This would be on an addendum to the agency agreement which would require my signature. If you tell your client you will provide them with something, then provide it!
