What does fiduciary mean to you?

Real Estate Broker/Owner

What does fiduciary mean to you?

The dictionary defines it this way,

Main Entry: fi·du·cia·ry 
Pronunciation: [fi-doo-shee-er-ee, -dyoo-]
Function: noun 
Inflected Form: plural -ries 
:  one often in a position of authority who obligates himself orherself to act on behalf of another (as in managing money or property) and assumes a duty to act in good faith and with care,candor, and loyalty in fulfilling the obligation :  one (as an agent)having a fiduciary duty to another 

As a real estate and mortgage broker in the state of California, and I’m sure other states are the exact same way; I have a fiduciary responsibility to my clients.  If I don’t fulfill my responsibility I would become susceptible to disciplinary action, and just plain wouldn’t be serving my client well. 

I had the opportunity to represent a seller in a short sale transaction and had the oddest conversation with the buyer’s lending agent.  The buyer submitted an offer as an individual, he was married and also had a family trust, I didn’t know about the family trust, but on the residential purchase agreement he had stated that he would take title as a married man, sole and separate property.  This isn’t a big deal, it happens all the time, but when we submitted to the first and second lenders for short sale approval in the beginning of the process we told them how the buyer would take title based on the fully executed purchase contract.  Well, we were coming down to the last week of the short sale approval, meaning that the second lender gave us until a specific date to close and we were one week away from that deadline.  Sometimes the lenders won’t extend the short sale approval, and if they do, it can take two weeks to get a response if the lender is really backed up.  The reason why the buyer wanted to hold title in his trust is because he had a dangerous job and was worried that if he passed away prior to the property transferring to a trust then it could pose legal issues.

The buyer’s agent called me and told me that she was having issues with the loan officer because he submitted the loan to his lender and stated the client wanted to take title in his trust, not as a married man as sole and separate property as the contract stated.  This poses a problem because the short sale lenders’ agreed to the short sale, but they didn’t agree to a trust purchasing the property.  In order to have the change made we would need to resubmit and because the end of the approval was approaching we ran the possibility of overshooting the dead line.  There’s an easy way around this problem, the buyer would simply close escrow as a married man, sole and separate property, and then deed the property to his trust immediately following.  The paperwork for this can be prepared ahead of time by the escrow officer and the home would be out of the ownership of the trust for 5 minutes at most.

Because I have a lending background the buyer’s agent asked if I would call the loan officer.  I’ve been in this business long enough to know you have to approach this situation with great care.  I called the loan officer; we’ll call him Albert, and I was very polite when I called.  I wasn’t accusatory; I approached the call as though we were teammates working toward the same conclusion.  I simply offered up an idea that the buyer could have both deeds created and then recorded simultaneously and that he should seek legal counsel to find out if this meets his needs.  Albert’s first sentence to me after I made my suggestion went like this, “I’ve been doing this for 24 years and have a fiduciary responsibility to my client, I can’t recommend this for him because the property won’t go into the trust for two weeks at the earliest.”  He then went on to cut me off every time I tried to speak and the conversation ended with him telling me that I didn’t know what I was talking about.  Albert was just plain wrong on many different levels. 

I called the buyer’s agent and suggested that she approach the buyer directly and explain the situation and have him speak with the escrow officer and his attorney to get the proper direction.  The buyer ended up closing escrow as a married man, sole and separate and then transferred ownership nearly simultaneously into his trust.  The sale closed on time, and everything ended well.     

Apparently Albert’s fiduciary responsibility stopped at his level of understanding.  What he wasn’t grasping is that the transaction was at jeopardy of not closing, and his client would lose the deposit if it didn’t.  He was so unwilling to hear an alternative solution because of his so called fiduciary responsibility that he shut everybody out of the process.  My experience of people like Albert who speak about their years of experience and fiduciary duties is that they usually have an underlying lack of confidence in themselves and their ability.  Did Albert fulfill his fiduciary duty to his client?  What does fiduciary duty mean to you?  How would you have handled the problem?  I’m open to feedback, don’t hold anything back.

Posted by

Jesse Gonzalez, Broker



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