Aceable level 4 chapter 4
Fiduciary Duty: Disclosure
License holders are required, whether working as an agent for someone or not, to disclose "material facts." Material facts are facts, oftentimes related to the condition of the property, that might cause a buyer or seller to change their mind about a transaction. The disclosure of material facts is a duty of disclosure owed to everyone, but a fiduciary duty of disclosure goes beyond that. It is a duty to disclose EVERYTHING an agent knows or learns about related to a transaction that would serve the interest of their client. Some of this, of course, would NOT be disclosed to the other party in the transaction.
Fiduciary Duty: Loyalty
An agent has a duty of loyalty to their principal. Their job is to represent their principal's best interests, even over their own
Fiduciary Duty: Accounting
License holders owe their clients a duty of accounting — agents must account for records and all funds entrusted to themselves. License holders are not to use a client's funds for their personal funds, nor can they store them in the same account. Commingling Mixing a client's funds with an agent's personal funds is known as commingling and is illegal. Mixing money that belongs to another person with personal money is both messy and unethical. Handling of Escrow Funds If a license holder receives escrow funds in a real estate transaction, that money must be deposited within a reasonable amount of time into a separate account. Agents (and any sales agents acting on their behalf) cannot wait any longer than the close of the second business day after the signing of a contract to make these deposits. The money will then be held in the escrow or separate account until closing, at which time the agent must release the funds to the appropriate party. Likewise, license holders may not disburse money deposited in a custodial, trust, or escrow account before the completion or termination of the real estate transaction. Note: As with the fiduciary duty of confidentiality, the duty of accounting exists beyond the termination of the agency relationship — as long as there remain any outstanding funds to be settled.
Buyer-Customers
One of the challenges with working with buyers as customers (as opposed to clients) is that when they spend time with agents, the buyers can fall under the impression that the agent is on their side and looking out for them in the transaction. Timely Disclosure That is why it is so important for an agent to disclose upfront to the buyer the exact nature of their relationship. By doing so, the agent will meet the state requirement, but also put the buyer on notice that the license holder does not have a duty to represent them unless they become a client. Don't Forget the IABS Notice Has anyone ever walked on a car lot and thought that the salesperson was looking out for them in a purchase of a car, trying to get them the best deal possible? Doubt it. And yet, buyer-customers might make the mistake of thinking that the listing agent is representing the buyer. Upon the first contact with anyone, license holder or customer, the agent should inform the person whom they are representing. That person should also receive a copy of the Information About Brokerage Services Notice (IABS). This is not a fiduciary duty; it's just a requirement. Turn It to Your Advantage The license holder may have to remind the buyer every so often that they are not representing the buyer. That could be a good lead-in for the agent to say, "But, I could represent you in finding your home." As with sellers, a lot of buyers don't really understand all the benefits of having an agent fully representing them. Show 'Em What They're Missing Many agents create a presentation to show customers all the amazing ways they could help them if they were to form an agency relationship. Once a buyer sees the value in that relationship, the license holder could become that buyer's agent. By being a buyer's agent, the license holder is more likely to be sitting next to them on closing day. The agent should always be aware of whether or not they are creating an intermediary agency relationship, though. From Customer to Client The transformation in the way the agent conducts themselves when a customer turns into a client is amazing. That's because when a buyer becomes a client, the agent's very job is to save the buyer as much money as possible. Doesn't everyone want someone on their team trying to save them money at every corner? Of course!
Buyer-Clients
The agent who represents the buyer must always keep in mind that their client's interests come first. The Commission Conundrum I say this because a buyer's agent's commission is based on the sales price, and, yet, it is the job of the buyer's agent to get their client the lowest price possible. If the agent is successful in this endeavor, it will result in the reduction of their potential compensation. Now that's some true loyalty, right there! Loyalty = More Business = More Commission However, if you provide a high level of service and don't obsess about the dollar amount of the commission, the buyer client will recognize your skill and professionalism. They will sing your praises throughout the community and more business will come to you as a result. Giving good service means repeat business and referral business in real estate — and that will mean more commission!
OLD CAR
The fiduciary duties an agent owes a client have been organized into six categories or areas of responsibility. A great way to help you remember the fiduciary duties is the acronym OLD CAR. Obedience (if legal) Loyalty (100%) Disclosure (full) Confidentiality (forever) Accounting (forever) Reasonable care
Fiduciary Duty: Confidentiality
The fiduciary duty of confidentiality is connected quite closely to that of loyalty and disclosure, in that private information given to the agent by the client will be kept secret (unless the client wants to have the information shared). It should be noted that the duty of confidentiality is one that extends beyond the relationship, meaning that after termination of the agency relationship, regardless of whether or not the objectives of the relationship were met, the agent must keep confident anything learned during the relationship.
Fiduciary Duty: Obedience
While an agent will understandably want to use their expertise to guide the client to a good decision, ultimately the final decision is the client's alone to make. Letting a client make an unadvisable choice can be one of the hardest things to do — but that's just what obedience entails.
A Unique Industry
Working in real estate is a unique career for three reasons: 1) Real estate agents work with their competitors at other offices to share inventory and negotiate transactions to a closing. 2) Agents have fiduciary duties to their clients. Attorneys and medical doctors have a similar emphasis on fiduciary duties, but this commitment to always putting the client's interests first is rare in many other industries. The Extra Mile You could say that real estate license holders go further in giving these kinds of services to their clients than any other industry. However, in a court of law there are confidential pieces of information that lawyers and doctors cannot share. The confidentiality of a real estate agent may not extend quite that far and may have to stop when giving testimony in a courtroom. An agent should always consult an attorney if they are unsure whether or not they should keep something confidential. Second Nature This may sound difficult, but as new sales agents develop their skills in real estate, putting the client first becomes a natural part of their work life. And if you think about these fiduciary duties often, it will probably enhance not just your business, but maybe your personal relationships as well!
Fiduciary Duty: Reasonable Care
You, as a license holder, will be hired to do more than just find a willing and able buyer or locate an adequate property. When hired, you are held to a high standard of care that requires knowledge concerning real estate. In other words, the exercise of your expertise as a real estate professional is an expectation and requirement if you are to fulfill your duty of reasonable care. You must use reasonable care when doing such things as: Filling out paperwork Writing an offer Inputting information into MLS Preparing graphics, taking pictures, mailing flyers, and staging properties Completing a listing and showing properties Writing agreements Knowing what to say and when to keep quiet. In short, take care of the client the way that you would want to be taken care of yourself, using the education, experience, and expertise you have gained during your career as a sales agent. This duty is based on what could be reasonably expected for a professional real estate agent to do.