A fiduciary is an individual who is entrusted with acting on behalf of another individual and making decisions in their best interest. Fiduciaries are enlisted with legal duties or obligations to their client by virtue of their experience and specialized training. A lawyer, a trustee, and a parent all have fiduciary duties. A real estate agent also has a fiduciary duty to all their clients.
The most important aspect of the real estate agent’s fiduciary duty is the requirement to be honest and candid. The real estate agent will spend most of the house-buying or -selling process working independently of the client by negotiating with other parties, coordinating inspections, and reviewing contract documents. The real estate agent is therefore required to act as a proxy for the client by making decisions for the client and also reporting information in an open and honest manner to the client.
A real estate agent’s fiduciary duties include:
- The duty to fully disclose all material facts to the client
- The duty to fully disclose all purchase offers to the seller
- The duty to handle the client’s information and affairs with loyalty and confidentiality
- The duty to refrain from representing an opposing party in the same transaction without both knowledge and consent of both parties
Real estate agents are hired by clients to act in the clients’ best interests, not their own best interests. When a real estate agent decides to act for their own personal benefit to the detriment of their client, they have breached the fiduciary duty that they owed to their client. The following are common breaches of fiduciary duty:
- Receiving secret profits or fees that are not disclosed to the clients
- Failing to inform a seller of other offers on the table after an offer has been accepted
- Failing to advise a buyer of any material defects to the property
- Dual representation or facilitating a sale of a property by acting as the real estate agent for both the buyer and seller without their knowledge
- Providing the client’s personal information to the other broker without the client’s permission
- Declining or accepting an offer without the client’s approval
Any one of these breaches can have a serious financial impact on the client. A breach of the fiduciary duty could also cause other irreparable damage to the client, especially if the client is stuck with a house full of defects or have had their personal details disclosed to unknown people.
When your real estate agent has breached one of the fiduciary duties, you may feel confused as to how to proceed. You likely were financially affected by the breach. You may have lost the opportunity to sell your home to the highest offer, or you may have found yourself listed as the defendant in a lawsuit involving a failure to disclose. A real estate lawyer can advise you on how to best proceed and can educate you on your real estate agent’s responsibilities.