Fiduciary Relationships in Real Estate: 5 Things to Know

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By Clever Real Estate Updated October 21, 2021


A real estate agent that takes their fiduciary responsibilities seriously is an invaluable asset to both buyers and sellers. They must provide their services in the best interest of the client. Want to learn more about what that means for your real estate transaction? Check out our guide.

Fiduciary Relationships in Real Estate: 5 Things to Know

Many home buyers and sellers may be unaware of the true meaning of fiduciary relationships when it comes to the real estate market. They may assume that the real estate broker showing them homes now represents them.

The reality of this is, you have the privilege of choosing your buyer's agent or choosing your seller's agent and determining the relationship you will have with them. The duties that come with the fiduciary relationships allow your agent to always have your best interest in mind from that moment forward.

What is a Fiduciary Relationship in Real Estate?

In the world of real estate, a fiduciary relationship is when a real estate broker or realtor takes on the role of an agent in a transaction and takes on duties to make decisions that are in the best interest of the client.

Five Things to Know About Fiduciary Relationships in Real Estate

All Fiduciary Responsibilities Must Be Carried Out Legally

The agent is now responsible to carry out the wishes of their clients, as long as these requests can be completed legally. No agent is ever required to break the law or engage in unethical behavior to maintain the happiness of their client.

Agents Must Always Work in the Best Interest of the Client

Agents must always make decisions in the best interests of their clients. This results in a high level of trust between clients and agents that benefits both sellers and buyers. A listing agent would never inform the buyer that the seller would accept less or that they think the property for sale is overpriced.

In the same vein, the buyer’s agent would never give any information to the seller that may sway their feelings about selling to this particular person. This would also come into play in situations that could affect the agent's real estate commission, but that would negatively affect the client. The agent would refrain from trying to sway the thoughts of the client for their gain.

Agents Must Not Disclose Confidential Information

In a fiduciary relationship, confidentiality is essential. This means that an agent should refrain from releasing any information about a client such as where they work, their level of education, or their finances. Any information that could be damaging during the negotiation period should especially be kept confidential.

Work with an agent who looks after your interests.

A Clever agent will always protect your rights and interests.

Your Agent Will Handle Accounting with Care

The agent must make sure to keep accurate records and a proper account of all money and property that may be entrusted to them. They should never combine money given to them with their own money or another client’s. Agents should generally give escrow funds to their brokers or to their client's real estate attorney, who will then place it in an escrow fund.

Your Agent Will Help to Ensure That Your Property Stays Safe

Additionally, they would take great care to keep track of who has entered and exited the property. They do their part to keep it secure by keeping track of keys given to agents or by placing a lockbox to secure the property.

What to Do If an Agent Breaks a Fiduciary Relationship

As a fiduciary, every decision that is made should always be in the interest of the client. However, this isn’t always the case and agents can break these relationships. These breaches of fiduciary duties can be done in three ways:

  • Duty: In the case of duty, the agent had duties to the client, such as the duty of acting in good faith, that they failed to do.
  • Breach: The agent could have breached their duties by disclosing information, misusing funds, being dishonest, combining their funds with their clients, or avoiding their responsibilities as the agent.
  • Damages: The agent’s actions resulted in the client suffering losses due to the breach.

To put this in plain terms, your real estate agent would break their fiduciary duty if they withheld certain offers that were put in for your home, especially if these offers were much higher than the one you accepted.

Another example of this would be if they referred you a terrible painter who gave them a kickback anytime they sent a customer their way.

What are your options now?

Suppose you find out that your agent colluded with another agent to sell your house at a much lower price, you can fight to have the contract nullified through a process called recission. This results in the cancellation of the contract and the return of your money or possessions as if the contract had not been made.

Another option is to require that your agent forfeits the commission and that it be returned to you as the seller. When an agent breaches their fiduciary duties, they are no longer legally entitled to receive any sort of payment.

If the client suffered a loss due to their agent’s misconduct, they could be awarded damages. The agent would be required to compensate the client for any damages.

Working with Clever

Clever agents work hard to ensure that clients get the most out of their real estate transactions. They uphold their fiduciary duties so that buyers and sellers ever have to worry about whether an agent is acting in their best interest.

Want to work with a trustworthy gent? Start comparing reputable agents in your area.

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