CHAPTER FIVE: FIDUCIARY REPSONSIBILITIES Flashcards
___- refers to a real estate affiliate broker or broker acting in a fiduciary role on behalf
of the principal.
agent
___- refers to the seller or buyer of real property who benefits from a fiduciary relationship
with a real estate affiliate broker or broker. The principal is the individual who hires the agent to
work on their behalf.
principal
__ __- refer to the legal and ethical responsibilities an agent owes to their principal.
Fiduciary duties
For example, it is illegal to discriminate against sellers based on their race or religion. What if a
client tells you they only want to sell their home to white Christians because of the demographics
of the neighborhood? You then need to explain to your client that your duty is to present all valid
offers to them, regardless of race, religion or any other protected category.
Obedience
Similarly, a seller may ask you to lie about the condition of the property. While you are not expected
to be a subject matter expert on architecture, plumbing or electricity, you cannot lie about material
defects that you are aware of or that have been disclosed to you. So, if you are the listing agent and
your seller tells you the pipes are cracked, or if you see boxes floating in a flooded basement, you
have no choice but to disclose that to a buyer. Of course, the best thing is to advise your client to fix
the issue prior to the closing.
Obedience
___- is one of the fundamental duties an agent owes to the principal. This duty requires a real
estate broker to act only in the best interests of the client, excluding even the broker’s own interest.
Loyalty
OLDCAR For example, Remy Pascal is a broker representing seller Carl Smith. Remy decides that the property
is a great candidate for a quick flip and makes an offer on the home. Immediately after purchasing
the home, Remy resells it for a profit. In this case, Remy has not acted loyally in safeguarding Carl’s
interest above his own.
It is not illegal for a broker to make real estate investments, but turning a quick profit on a client
you are supposed to represent, is considered theft of an opportunity for profit owed to the seller,
or principal.
LOYALTY
The Seller’s Agent has to divulge any known material defects in the property. However, they
must NOT divulge information about traffic problems, poor schools, crime rates and declining
property values in the area or any other details that make the property less appealing to a buyer.
Disclosure
An Exclusive Buyer’s Agent must disclose everything they know about the seller, including the
motivations to sell and any opportunity for a faster sale. They must tell the buyer anything they
find out about traffic problems, poor schools, crime rates and declining property values in the
area. They must tell the buyer anything that might make the area less desirable to a buyer.
Disclosure
OLDCAR -
___- If you represent a seller you cannot tell a buyer that the seller must sell a property below the
listed price.
• On the other hand, if you represent a buyer you cannot tell the buyer that your client is willing
to pay more than the offer price presented.
Confidentiality
An exception to this rule is if the principal gives the agent permission to disclose certain confidential
information. For example, perhaps the principal wants to sell quickly and therefore allows the
agent to market the property as a “motivated seller”.
OLDCAR
_____- you are obligated to “account for”, or answer for, any property or
money that your client has entrusted to you. This includes money, deeds, and any other documents
given to you that relate to real estate transactions in which you represent them.
Accounting
For example, you are the listing agent and the client has given you a deposit for marketing expenses
in the sale of their home. You are expected to deposit this money into a separate account and to be
able to account for its use.
Accounting
____ ____ - As an agent, you are expected and required to use reasonable care and diligence in pursuing
your client’s goals. The standard of care assumes that, as a licensed real estate broker, you are
a competent professional, knowledgeable in your field. By holding a real estate license, you are
considered to have expertise above a non-licensed person.
Reasonable Care and Diligence
OLDCAR
• The seller’s Agents are expected to prepare themselves through education, to competently
represent the Seller in all matters.
• An exclusive Buyer’s Agents are expected to prepare themselves through education to
competently stand up for the buyer at all times.
REASONABLE CARE AND DILIGENCE
