Fiduciary–Realtor® Duties to Clients

When you enter into a listing agreement or buyer representation agreement with a real estate registrant, Realtor®, you become a CLIENT of the brokerage that that registrant is licensed with. That means that every registrant within that brokerage, including the owner, the broker of record, all brokers and sales representatives are held by LAW to owe specific duties to ALL clients. Your Realtor® is a Fiduciary.

A fiduciary holds ethical and legal responsibilities to her/his clients – a relationship that requires trust and prudence on the part of the fiduciary. Clients often entrust a significant amount of wealth to a fiduciary, in a real estate transaction that could be property, deposit, payment.

Part of the fiduciary’s role is to act, always and first and foremost, in the best interest of his clients.  Those duties owed to a real estate client are, Loyalty, Obedience, Competency, Disclosure, Confidentiality and Accounting.  Each duties is explained below:

This is the most important duty a real estate registrant owes to a client. A registrant is obligated, to act at all times, solely in the best interests of the client, excluding all other interests, including those of the registrant. A registrant must be aware of all situations that could cause a conflict of interest, such as buying their clients property, or selling their property to a client. An example of breach of loyalty is when a registrant buys a property listed with his/her firm, and immediately resells it at a profit. Such conduct is usually considered appropriate and lawful by persons who act at “arms length”, but a registrant would be considered to have stolen an opportunity for profit that rightfully belongs to the client.

A registrant is obligated to obey a client’s lawful and reasonable instructions, even if the registrant doesn’t agree with them. The key word here is “lawful”, the duty does not include an obligation to obey unlawful instructions, such as instructions to not market a property to minorities or to misrepresent the condition of a property or to misrepresent a buyer’s potential to buy. However, if a seller tells a registrant to list a house at a given price, the registrant must obey the sellers wishes (if the registrant choses to work for that seller).

A registrant is obligated to use reasonable care and diligence when pursuing the client's affairs. The standard of care expected of a buyer's or seller's real estate broker is that of a competent real estate professional. By reason of his/her license, a broker is considered to have skill and expertise in “real estate matters” superior to that of the average person, and they must use that skill and knowledge in pursuit of a client’s affairs. However, no registrant is expected to perform tasks or know information outside the scope of his/her real estate license. Real estate licensees are not expected to perform services normally provided by engineers, home inspectors, lawyers, accountants, or other professionals. If concerns arise outside the scope of a registrant's responsibility, the registrant must acknowledge that and suggest that the client seek assistance from a reliable outside source.

A registrant must disclose to his/her client any information relevant to the transaction in which the registrant has been engaged to assist. This includes any facts affecting the value or desirability of the property and all known relevant and material information. For instance, if a registrant notices a crumbling chimney on a house he/she is showing and fails to mention it, he/she would be in violation of his/her fiduciary duty to his/her buyer client. On the other hand, a registrant is not expected to know of problems that can not be seen or that should be uncovered by another professional. A registrant’s duty of disclosure to his/her client must not be confused with a registrant’s duty to disclose any know material facts about the property value to non-clients (customers, general public, etc). The duty to disclose known material facts is based on a real estate registrant’s duty to treat all persons honestly. The duty of honesty does not depend on the existence of a client relationship. A registrant must also disclose to all clients, at the earliest practicable opportunity, and in writing, any actual or potential conflicts of interest.

A registrant must not use information acquired for any purpose that is likely to cause the client harm or to interfere with the client’s business, now or in the future. In other words, a real estate registrant must keep confidential any information that may weaken a client’s bargaining position. For example, a registrant representing a seller can not disclose to a buyer what the seller is willing to accept. Conversely, a registrant who is representing a buyer is prohibited from disclosing to a seller how much that buyer is willing to pay. The duty of confidentiality should not be confused with a real estate registrant’s responsibility to disclose known material facts about a property to potential buyers. The obligation to disclose such facts, including defects, is based on the registrant’s duty to treat all persons fairly and honestly.

A registrant must account for and safeguard money, documents and property entrusted to their care. For example, registrants must ensure that a listed house is secure; that they know and keep track of the comings and goings; that they keep control of keys; and that a licensed registrant attends all showings. A registrant must ensure the deposit is safeguarded by the brokerage or lawyer until closing.

A client is a Realtor®'s most important asset.  The law may demand it, but morals and ethics should ensure it.

- Kathy Dimaline

Kathy Dimaline is a Real Estate Broker for RE/MAX Grey Bruce Realty Inc. The comments on this Blog are the opinions, only, of Kathy Dimaline and do not constitute any legal advice or legal opinion and does not represent the interests or opinions of RE/MAX Grey Bruce Realty Inc., brokerage.