Keep Clients Happy: Fiduciary Duties of an Agent

Ensuring you’re always putting your clients’ interests ahead of your own is the golden rule for real estate agents to live by. Fiduciary duties are the guidelines to accomplish that. Besides a good practice, it is a legal obligation. Let’s learn the fiduciary duties of an agent in an easy way, especially as you prep for your real estate exam.

What is Fiduciary Duty in Real Estate?

Imagine this: You’re entrusting someone with the keys to your financial future, literally and figuratively. That’s what clients do when they work with real estate agents. Fiduciary duty is nothing else but building trust. It means you, as the agent, must act in your clients’ best interests above everything else. It’s a blend of legal requirements and moral obligations.

Real estate agents owe their clients six primary fiduciary duties: obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care. Let’s dive into each one and see what they mean.

1. Fiduciary Duty: Obedience

This one’s pretty straightforward. If your client asks you to do something (within the bounds of the law, of course), you do it. No questions asked. But remember, if they’re asking for something illegal, it’s a hard no.

2. Fiduciary Duty: Loyalty

Your client’s needs and goals come first, period. Even if it means less commission in your pocket because you’re sticking to their budget, their interests are your top priority.

3. Fiduciary Duty: Disclosure

You’ve got to spill every bean about a property or transaction that could influence your client’s decision. Found out the basement floods every spring? Your client needs to know.

4. Fiduciary Duty: Confidentiality

Whatever your client tells you stays between you two unless given permission to disclose it or required by law. Their financial situation, must-haves, and deal-breakers are all top secret even after the transaction is finished. That makes this duty the only one that lasts forever.

5. Fiduciary Duty: Accounting

You must meticulously keep track of every penny and every document related to your client’s transaction. You have to be a responsible steward of their resources.

6. Fiduciary Duty: Reasonable Care

Think of yourself as the guide through the jungle of real estate. You need to use all your knowledge, skills, and tools to navigate your clients safely and successfully.

Examples of Fiduciary Duty in Real Estate

Let’s put these 6 fiduciary duties of a real estate agent into real-life scenarios:

• Sticking to the budget: Showing properties only within the client’s budget, not a penny over.
• Full disclosure: Tell your client if a house has a termite history or any other material fact. Full transparency is vital.
• Handling offers: Every offer on the table gets presented to your client, even the lowball ones.
• Keep information confidential: When it comes to your client’s financial details, those are yours to guard with your life.

Consequences of Breaching Fiduciary Duty in real estate

Breaching fiduciary duty is a big no-no.  Some of the potential consequences of breaching fiduciary duty include:

• Lawsuits: Clients who believe that their agent has breached their fiduciary duty can take legal action against the agent. That could lead to the client receiving financial damages, which can be costly for the agent.
• Loss of license: In some cases, a breach of fiduciary duty can lead to disciplinary action by the licensing board. Depending on the severity of the breach, an agent may face penalties, including the suspension or revocation of their real estate license.
• Fines: A licensee who violates their fiduciary duties to a client may be subject to a fine. The amount to pay would be under the State Real Estate Commission or Department regulations.

Summarizing

Being a real estate agent comes with significant responsibilities. Obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care are your guiding stars. Stick to them, and you will build a career you can be proud of. And remember, steering clear of breaches in fiduciary duty keeps you safe and sound, legally and professionally.

There you have it! Fiduciary duties in a nutshell. Keep these principles close to your heart, and you’ll have a bigger chance to pass the exam and become the agent everyone wants to work with.