Fiduciary duties are the highest duties known to the law. A real estate broker is legally responsible for certain specific duties to his principal, in addition to any duties or obligations set forth in a listing agreement or other contract of employment. Professional liability insurance for real estate brokers is needed for proper protection.
Loyalty
A duty of loyalty is one of the most fundamental fiduciary duties owed by an agent to his principal, obligating the 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. This prohibits brokers from accepting employment from anyone whose interests compete with the principal’s interests.
Confidentiality
An agent is obligated to safeguard their principal’s confidence and secrets, keeping any information that could compromise the principal’s bargaining position confidential. 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.
Disclosure
An agent must disclose to the principal all relevant information they’re aware of. This obligates them to reveal to the seller:
- Identity of all potential purchasers.
- Factors 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.
- Relationship to, or interest in, a prospective buyer.
- Buyer’s intention to subdivide or resell the property for a profit.
- Other information that might affect the seller’s ability to obtain the highest price and best terms in the sale.
Obligated reveals to the buyer include:
- Willingness of the seller to accept a lower price.
- Facts relating to the urgency of the seller’s need to dispose of the property.
- Relationship to, or interest in, the seller of the property for sale.
- Factors affecting the value of the property.
- Time the property has been on the market and any other offers/ counteroffers
- Other information that would affect the buyer’s ability to obtain the property at the lowest price and on the most favorable terms.
Obedience
Brokers must obey promptly and efficiently all lawful instructions of their principal. However, this duty plainly does not include an obligation to obey any unlawful instructions; for instance, an instruction not to market the property to minorities or to misrepresent the condition of the property.
Reasonable Care & Diligence
By reason of license, a real estate broker is deemed to have skill and expertise in real estate matters superior to that of the average person. A broker is under a duty to use superior skill and knowledge while pursuing principal’s affairs. Agents must discover facts relating to the principal’s affairs that should be investigated.
Accounting
There’s an obligation to account for all money or property belonging to the principal that is entrusted to them. This duty compels a real estate broker to safeguard any money, deeds, or other documents entrusted to them that relate to the client’s transactions or affairs. Liability insurance for real estate brokers was designed for fiduciary slips ups or discrepancies.
FOLLOW US:
