When you hire a real estate agent, whether you’re a buyer or seller, you’re establishing what’s called a fiduciary relationship. It doesn’t matter whether you’re buying a house in Lake City, Florida or you’re selling one in Nome, Alaska; the point is that your agent agrees to take on certain responsibilities that will help you—and only you—with your transaction.
But what is a fiduciary relationship, and what does it mean to you as a client?
What is a Fiduciary Relationship?
The term fiduciary means “faithful servant,” and it describes your relationship with your real estate agent. Your agent has a duty to represent your best interests, no matter which side of the transaction you’re on.
What Are Fiduciary Duties?
A real estate agent has a handful of obligations to his or her clients; we call them fiduciary duties. Your agent’s fiduciary duties include:
- Reasonable care and diligence
Your real estate agent has to account for all the funds you entrust to him or her. He or she can’t mix client funds with her own personal or business funds.
Reasonable Care and Diligence
Your agent has to use all of his or her skills, and use them to his or her best ability, on your behalf. He or she must act as a competent real estate professional and work to further your best interests during the transaction.
Your agent can’t tell the other side anything that may be damaging to your negotiations, and he or she must keep everything about your transaction confidential, too. That means if you’re a buyer, your agent can’t tell the seller’s agent how much you’re actually willing to pay for a home (or, on the other side of the coin, how low you’re willing to go if you’re the seller). Confidentiality doesn’t extend to hiding defects in the property or to misrepresent the property’s condition, though.
Your agent has to disclose any information he or she receives that could benefit your position in a negotiation. He or she has to disclose facts that affect the value or desirability of a property, too.
Your agent is required to put your interests above his or her own, and he or she owes you undivided loyalty.
Obedience. If you want to do something that might be a little out there, like claim your property is a UFO landing site that’s used on the fourth full moon of every year—provided that it’s legal to do so in your state—your agent has to go along with you. The idea is that the agent must obey all lawful instructions his or her client gives, because ultimately, it’s your transaction. (If you give unlawful instructions, you can expect your agent to tell you no.)