Fiduciary Duties What Every Agent Owes Their Clients

Fiduciary Duties What Every Agent Owes Their Clients

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Fiduciary Duties
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

These specific fiduciary duties include:
Loyalty ▪ Confidentiality ▪ Disclosure
Obedience ▪ Reasonable care and diligence ▪ Accounting

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. Thus, a real estate broker’s duty of loyalty prohibits him from accepting
employment from any person whose interests compete with or are adverse to, his principal’s interests.
A classic example of breach of this duty of loyalty by a real estate broker is a broker who purchases a property
listed with his firm and then immediately resells it at a profit. Such conduct ordinarily is perfectly
appropriate and lawful by persons acting “at arm’s length.” But a fiduciary will be deemed to have “stolen” a
profit opportunity rightfully belonging to his principal and thus to have breached his duty of loyalty.

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.
CAVEAT: This duty of confidentiality plainly does not include any obligation on a broker representing a
seller to withhold from a buyer known material facts concerning the condition of the seller’s property or to
misrepresent the condition of the property. To do so would constitute misrepresentation and would impose
liability on both the broker and the seller.

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. The duty of disclosure obligates a real estate broker
representing a seller to reveal to the seller:
 All offers to purchase the seller’s property.
 The identity of all potential purchasers.
 Any facts affecting the value of the property.
 Information concerning the ability or willingness of the buyer to complete the sale or to offer a
higher price.
 The broker’s relationship to, or interest in, a prospective buyer.
 A buyer’s intention to subdivide or resell the property for a profit.
 Any other information that might affect the seller’s ability to obtain the highest price and best terms
in the sale of his property.
A real estate broker representing a buyer is obligated to reveal to the buyer:
 The willingness of the seller to accept a lower price.
 Any facts relating to the urgency of the seller’s need to dispose of the property.
 The broker’s relationship to, or interest in, the seller of the property for sale.
 Any facts affecting the value of the property.
 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.
 Any other information that would affect the buyer’s ability to obtain the property at the lowest price
and on the most favorable terms.
CAVEAT: An agent’s duty of disclosure to his principal must not be confused with a real estate broker’s duty
to disclose to non-principals any known material facts concerning the value of the property. This duty to
disclose known material facts is based upon a real estate broker’s duty to treat all persons honestly and
fairly. This duty of honesty and fairness does not depend on the existence of an agency relationship.

An agent is obligated to obey promptly and efficiently all lawful instructions of his principal. However, this
duty plainly does not include an obligation to obey any unlawful instructions; for example, an instruction not
to market the property to minorities or to misrepresent the condition of the property. Compliance with
instructions the agent knows to be unlawful could constitute a breach of an agent’s duty of loyalty.
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 duty 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. Simply put, this is the same duty
any professional, such as a doctor or lawyer, owes to his patient or client.

An agent is obligated to account for all money or property belonging to the 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 of affairs.

We take these responsibilities very seriously and this is one of the reasons you should use the MLS and a Realtor.

Jay Bru


Jay Bru Headshot
Phone: 480-466-4917
Dated: October 29th 2020
Views: 6,535
About Jay: I grew up on a grain and cattle farm in Saskatchewan, Canada where I started working at a very young...

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