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In November, 1986, the National Association of Realtors® published a
booklet titled: "Who Is My Client? - A Realtors® Guide to Compliance
with the Law of Agency". The booklet describes fiduciary duties in
Section IV. DUTIES OWED BY AN AGENT TO HIS PRINCIPAL: "A real estate
broker who becomes an agent of a seller or buyer, either intentionally
through the execution of a written agreement, or unintentionally by a
course of conduct, will be deemed to be a fiduciary. Fiduciary duties
are the highest duties known to the law. Classic examples of fiduciaries
are trustees, executors, and guardians. As a fiduciary, a real estate
broker will be held under the law to owe certain specific duties to his
principal, in addition to any duties or obligations set forth in a
listing agreement or other contract of employment (such as a buyer
agency agreement)."
These specific fiduciary duties include:
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Loyalty - "A duty of loyalty is one of the
most fundamental fiduciary duties owed by an agent to his principal.
This duty obligates a real estate broker to act at all times solely
in the best interests of his principal to the exclusion of all other
interests, including the broker's own self-interest. A corollary of
this duty of loyalty is a duty to avoid steadfastly any conflicts of
interest that might compromise or dilute the broker's undivided
loyalty to his principal's interests."
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Obedience - "An agent is obligated to obey
promptly and efficiently all lawful instructions of his principal."
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Disclosure - "An agent is obligated to
disclose to his principal all relevant and material information that
the agent knows and that pertains to the scope of the agency."
This duty specifically obligates a real estate broker
representing a buyer to reveal to the buyer:
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The willingness of the seller to accept a lower
price.
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Any facts relating to the urgency of the seller’s
need to dispose of the property.
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The broker’s relationship to, or interest in, the
seller or the property for sale.
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Any facts affecting the value of the property.
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The length of time the property has been on the
market and any other offers or counteroffers that have been made
relating to the property.
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Any other information that would affect the buyer’s
ability to obtain the property at the lowest price and on the most
favorable terms.
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Confidentiality- “An agent is obligated to
safeguard his principal’s confidence and secrets. A real estate
broker, therefore, must keep confidential any information that might
weaken his principal’s bargaining position if it were revealed. This
duty of confidentiality precludes a broker representing a seller
from disclosing to a buyer that the seller can, or must, sell his
property below the listed price. Conversely, a broker representing a
buyer is prohibited from disclosing to a seller that the buyer can,
or will, pay more for a property than has been offered.”
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Reasonable care and diligence - "An agent is
obligated to use reasonable care and diligence in pursuing the
principal's affairs. The standard of care expected of a real estate
broker representing a seller or buyer is that of a competent real
estate professional. By reason of his license, a real estate broker
is deemed to have skill and expertise in real estate matters
superior to that of the average person. As an agent representing
others in their real estate dealings, a broker or salesperson is
under a duty to use his superior skill and knowledge while pursuing
his principal's affairs. This duly includes an obligation to
affirmatively discover facts relating to his principal's affairs
that a reasonable and prudent real estate broker would be expected
to investigate."
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Accounting - "An agent is obligated to
account for all money or property belonging to his principal that is
entrusted to him. This duty compels a real estate broker to
safeguard any money, deeds, or other documents entrusted to him that
relate to his client's transactions or affairs."
From Section VI. UNDISCLOSED DUAL AGENCY: A BREACH OF AN
AGENT'S DUTY OF LOYALTY: "An agent's duly of loyalty compels him to
refuse to accept any employment that would require him to act contrary
to, or in competition with, the interests of his principal. Buyers and
sellers of real estate are deemed by law to "compete" with one another
and to have "adverse" interests. Accordingly, a real estate broker who
acts as an agent for both a buyer and a seller in the same real estate
transaction is a dual agent. A real estate broker who acts for both the
buyer and the seller and does not clearly disclose his status to both
parties and receive their informed consent to the arrangement is an
undisclosed dual agent. Undisclosed dual agency is universally
considered to be a breach of an agent's duty of loyalty to his
principal. It is also considered to be an act of fraud and is a
violation of the real estate license law of many states."
"Although disclosed dual agency relationships are
technically lawful, there are compelling reasons real estate brokers
should avoid creating them (and buyers and sellers should avoid
consenting to them). Courts are very strict concerning the degree of
disclosure necessary to make a real estate broker's dual agency lawful.
For example, a lawful dual agent must explain carefully to both the
buyer and the seller that he is also acting as a fiduciary for the other
party and owes both of them the full range of fiduciary duties (with the
exception of loyalty and full disclosure). The real estate broker must
also ensure that both the buyer and the seller understand that by
consenting to the dual agency arrangement, they each are forfeiting
their right to receive their agent's undivided loyalty."
"Without this comprehensive disclosure and each
principal's informed, and preferably written, consent, the dual agency
will still be deemed undisclosed and therefore unlawful. Dual agency is
a totally inappropriate agency relationship for real estate brokers to
create as a matter of general business practice. Undisclosed dual agency
is a clear breach of a broker's fiduciary duty to each of his principals
and is generally viewed to be an act of fraud. The disclosures and
consents necessary to make a dual agency lawful are so comprehensive and
specific that a typical real estate broker cannot undertake them as a
matter of routine."
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