What Does an Agent Do for You? Part 1 – Fiduciary Duties

When researching agents, it’s important to understand what they do and what you need to consider when choosing the right agent.

What are an agent’s legal duties?

When a person becomes an agent, they become your fiduciary. A fiduciary is bound by law to provide the following services to a client:

• Loyalty
• Obedience
• Confidentiality
• Disclosure
• Reasonable Care and Diligence
• Accounting

Loyalty

Your agent has to work in your best interest, and your best interest only. That means putting any benefits to you above their own and avoiding any situations that could pose a conflict of interest, such as undisclosed dual agencies (learn more about dual agencies in our .

Real-life example: The duty of loyalty is most commonly implicated in cases of dual agency (also referred to as designated agency and limited agency in some states). A conflict of interest potentially arises whenever an agent represents both the buyer and the seller. For example, where an agent acted as a dual agent but did not obtain the consent of both parties, the agent was prohibited from recovering a commission. (L. Byron Culver & Associate v. Jaoudi Industrial & Trading Corp. (1991) 1 Cal.App.4th 300.)

Obedience

Your agent must listen to any lawful instructions you give them.

Real-life example: Where the seller alleged that she instructed the agent to draft a sale contract to reflect the oral agreement she made with the buyer to buy back the property after 6 months, and the agent failed to do so, she had properly alleged a breach of the agent’s duty to follow instructions. (Thomson v. Canyon (2011) 198 Cal.App.4th 594.)

Confidentiality

Your agent has to keep your personal information private, including information about how much more you’re willing to pay. An agent working for the seller can’t, however, withhold any information about the condition of the property.

Real-life example: The seller’s agent knew that the property was encumbered by debts greater than the purchase price but did not disclose that fact to the buyer. The agent argued that the debts were confidential financial information. However, even though the information was confidential, it was material to the desirability of the purchase, and should have been disclosed. (Holmes v. Summer (2010) 188 Cal.App.4th 1510.)

Disclosure

Your agent has to disclose any information about the sale. This includes their relationship with the seller, any information that might affect a property’s value, how long it’s been on the market, and any other relevant information. While they have to keep your willingness to pay more confidential from the seller, they have to disclose to you if the seller is willing to take a lower price.

Real-life example: The seller’s agent disclosed a pest report to the buyers which indicated some minor pest control work was needed, but did not disclose another pest report that indicated a much more substantial amount of work was needed. The agent was liable for nondisclosure, and was also assessed for punitive damages. (Godfrey v. Steinpress (1982) 128 Cal.App.3d 154.)

Reasonable Care and Diligence

Your agent has to commit to using a reasonable amount of care in representing your interests. That means they need to be competent in real estate and do their due diligence in gathering information about properties and doing their homework about deals.

Real-life example: The buyers wanted to obtain a property greater than one acre in size, so that they could subdivide it for their children. Their agent told them that the property in question was larger than one acre, but he did not investigate this asserted fact, or do anything to make sure it was accurate. In fact the property was less than an acre, and the agent was liable for the difference in cost between the property and a comparable one-acre property. (Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555.)

Accounting

Your agent has to account for all funds, property, deeds, and important documents that you entrust to them. They can’t at any point combine any money you give them with their personal funds or spend money you’ve given them even if it’s with the intent of repaying it later.

Real-life example: The buyer gave his agent a check for the deposit on a purchase of property. The agent deposited the check in an account with his personal money, and then used money from that account for personal purposes. The Real Estate Commissioner properly revoked the agent’s license for commingling the funds. (Brown v. Gordon (1966) 240 Cal.App.2d 659.)

Situations That Waive Certain Fiduciary Duties

In some cases, as with a dual agency, your agent waives some of their fiduciary duties as long as they disclose information to the relevant parties.

Real-life example: The listing agreement stated in several places that the agent was not providing tax advice, and if the seller wanted tax advice, to speak to an accountant. The court held that any duty the broker may have had to advise the seller about tax consequences of the sale was negated by the contract language. (Carleton v. Tortosa (1993) 14 Cal.App