The real estate world can be full of specialized lingo which can be tough to unravel without a trustworthy real estate agent like Brad Jensen to help you. One such term you may have come across is fiduciary duty.
Defining Fiduciary Duty
To start, we want to define what fiduciary means. Fiduciary is defined as a legal relationship of trust, with one individual entrusted to oversee and maintain the interests of the beneficiary.
So, when it comes to working with a real estate agent, the agent is the fiduciary and the client is the beneficiary. To properly perform their fiduciary duty, the realtor will represent the best interests of the seller or buyer they are working with, keeping the beneficiary’s information confidential the entire time.
What A Real Estate Agent’s Fiduciary Duty Provides
To help clarity what an agent’s fiduciary duties are, the National Association of Realtors (NAR)—of which Brad is a member—has identified clear obligations.
An agent’s fiduciary duties are all based on loyalty to their client, whether that person is a buyer or seller. For an agent to be considered loyal, they will always act in the best interest of their client, avoiding any potential conflicts of interest or divisions of loyalty.
Once contracted, a real estate agent has an obligation to keep the information of their client private, so that their negotiation position is not weakened in any way. For example, an agent will not share that a seller is willing to sell below the list price if the agent is acting for the seller. An agent acting for a buyer also will not share that a buyer is willing to pay more than the offered listing price.
Important to note, that while an agent is obligated to keep information confidential, they are not required to misrepresent for their client. The NAR states, “This duty of confidentiality plainly does not include any obligation on a broker representing a seller to withhold from a buyer known material facts concerning the condition of the seller’s property or to misrepresent the condition of the property. To do so would constitute misrepresentation and would impose liability on both the broker and the seller.”
An agent is obligated to follow the instructions of their client, so long as they are lawful. To act for a client in an unlawful manner, such as misrepresenting the condition of the client’s property, would breach the loyalty duty of the agent.
While balancing their other fiduciary duties, an agent will need to practice disclosure. These disclosure duties can be broken into two categories—disclosure to seller and disclosures to the buyer. The NAR defines the duties of a real estate agent representing a seller must tell their seller:
“ – All offers to purchase the seller’s property.
– The identity of all potential purchasers.
– Any facts affecting the value of the property.
– Information concerning the ability or willingness of the buyer to complete the sale or to offer a higher price.
– The broker’s relationship to, or interest in, a prospective buyer.
– A buyer’s intention to subdivide or resell the property for a profit.
– Any other information that might affect the seller’s ability to obtain the highest price and best terms in the sale of his property.”
As for the agent representing a buyer, the NAR states that the agent must tell their buyer:
“ – The willingness of the seller to accept a lower price.
– Any facts relating to the urgency of the seller’s need to dispose of the property.
– The broker’s relationship to, or interest in, the seller of the property for sale.
– Any facts affecting the value of the property.
– The length of time the property has been on the market and any other offers or counteroffers that have been made relating to the property.
– Any other information that would affect the buyer’s ability to obtain the property at the lowest price and on the most favorable terms.”
A real estate agent is duty-bound to ensure all of their client’s money and/or property which has been entrusted to them is fully accounted for the duration of their working relationship. This duty means an agent will keep documents, money, deeds or other things which related to their client’s private information safe.
Reasonable Care and Diligence
An agent is contracted to practice the reasonable care and diligence expected from a competent professional realtor. They are to practice this care and diligence by putting their skills and knowledge to use to help the agent’s client achieve their goals. Agents are expected to investigate potential information and other avenues which will help their client.
Here at Jensen and Company, we take our fiduciary duty seriously. If you want to work with a trusted realtor who has decades of experience to buy or sell real estate in Park City, contact us. We are looking forward to working with you to achieve your goals.