Fiduciary Duties in Real Estate

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When a real estate agent or broker is acting in an agency capacity for a buyer or seller client in a transaction, they have certain legally mandated duties that are called fiduciary duties. The position of the agent or broker is a fiduciary capacity, acting in the best interests of the client.

The required fiduciary duties vary by state real estate statute, but one example common to all is "Confidentiality" of the client's information. In a fiduciary capacity, it is the duty of the real estate agent or broker to protect the clients' privacy and keep all information confidential, unless required to divulge it by a court of law.


That's an acronym for the fiduciary duties required of a real estate professional acting as an agent of their client.

Obedience:  As an agent of your client, you must obey their instructions. That's only if their instructions are not illegal and are in accordance with the contract.

Loyalty:  As the agent for your client, you must be loyal and keep their best interests ahead of those of any other party, including yourself. How much commission you might make, particularly in competing offer situations, should not be a consideration and would be disloyal to your client.

Disclosure:  In many states the law requires a real estate agent, whether in an "agency" capacity or not, to disclose material facts to their client. Material facts are those that, if known by the buyer or seller, might have caused them to change their purchase or sale actions.

Confidentiality:  Your fiduciary duty of confidentiality means that you do not disclose anything that you learn about your client, their business, financial or personal affairs or motivations.

Accounting:  Accounting for all documents and funds in the transaction is a fiduciary duty. Accurate reporting of the whereabouts of all monies pertaining to the transaction and their ultimate disposition is a fiduciary responsibility.

Reasonable Care:  This duty is one to be very careful of. The words "reasonable care" are only finally fully defined in many cases by a judge or jury when it's too late to change your actions. 

How Agency Is Created:  

Express agency is created by either an oral or a written agreement between the principal and the agent. It indicates their express intent for this representational status.

In real estate, agency is normally created by either a written listing agreement with a seller or a buyer agency agreement with a buyer. Some states allow verbal agreements, but most do not.

Forms of Client Representation:  Most all the states require some form of disclosure to the client or prospective client as to how you will be representing them in their real estate transaction. Be sure that you understand your state's rules and the various ways in which you can be their representative. Your duties and obligations to the client will vary significantly based on the type of representation to which you've contractually agreed.

Know the laws in your state that pertain to when you are an "agent" and when you are not. When you are, know what's required of you and carefully and diligently try to perform accordingly. Don't try to offer advice or services for which you are not qualified, but know that there have been court rulings that indicated the real estate professional should have known where to send the client for the information they needed.

I've represented lawyers and judges, and none of them wanted me to be their "agent." Why? Vicarious liability is the responsibility of one for the acts of another. In the real estate business, this would be the case when a listing or buyer broker is an "agent" of the seller or buyer. The client can be held responsible for the actions of the broker agent if they have knowledge of an improper or negligent act.

Agency isn't practiced much anymore, as most of us are acting as transaction brokers. We still provide some of the duties that fall under fiduciary, but we're not legally bound to do so.