When you go to school to become a real estate agent, one of the first things you learn about is Fiduciary Duty. It is a keystone of integrity for anyone in the business, and is discussed again and again in your continuing education as an agent. It is also a basic component of the Code of Ethics to which every Realtor is bound.
But what exactly is fiduciary duty? Let’s begin with a simple acronym: CARLOAD. There are seven tenets which define fiduciary Duty:
Confidentiality-any information divulged by the client is kept in utmost confidence, and NOT SHARED with anyone. Think doctors and lawyers.
Advocacy-the agent has client’s best interests at heart, and will go to the greatest lengths to ensure the best possible outcome for them.
Reasonable care-the agent makes sure all processes are completed in a timely manner, follows up and follows through. Think of your agent as a project manager.
Loyalty-the agent acts in the best interest of the client; every decision and discussion is taken as a representative of the client.
Obedience-the agent who enters into an agreement with a client commits to perform according to their agreement. The agent acts (or doesn’t act) upon the instructions of the client (within the law, of course)
Accountability-the agent keeps the client apprised of all developments in the transaction and keeps the lines of communication open. The agent also double checks all the numbers so there are no surprises.
Disclosure-any information within the scope of the transaction is disclosed to the client. ALL offers are presented to the client, even the “lowballs”.
You will notice the term CLIENT is used throughout the preceding discussion. Anyone with an interest in buying or selling a home can be considered a customer, and an agent has a general obligation to be truthful and reasonably forthcoming to them. However, no fiduciary duty exists. A client is a customer who has entered into a representation agreement with the agent, either with a Listing Agreement or a Buyer-Broker Employment Agreement. Once this agreement is in place, the agent is officially on the client’s team, and therefore MUST act as a fiduciary.
One illustration of the value of this is in the situation of dual agency. Suppose Bob and Betty Buyer are driving down the street and see a Realtor’s sign in the yard of a home. They decide to call the number on the sign, belonging to the listing agent, Sammy Salesman. During the call, Sammy asks if they are represented by an agent, and they reply that they are not. This is an opportunity for Sammy to offer his services to Bob and Betty. This can be an issue because Sammy’s Fiduciary Duty remains with the homeowner, and it may be problematic for him to provide the same duty for the buyers without violating most or all tenets of the CARLOAD; for instance, the duty of full disclosure would conflict with the duty of confidentiality. Not illegal, but obviously a conflict of interest. Bob and Betty are certainly free to take him up on it; by so doing they would be agreeing to limited representation. A far better solution for them would have been to work with a buyer’s agent, who would work in their best interest by virtue of the Buyer-Broker Employment Agreement.
The importance of quality representation is difficult to understate, whether you are buying or selling real estate. By having a pro in your corner, you can be assured that your best interests are being served, and the transaction will come to a successful and satisfactory conclusion.