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In November, 1986, the National Association of Realtors® published a booklet
titled: "Who Is My Client? - A Realtors® Guide to Compliance with the Law
of Agency". The booklet describes fiduciary duties in Section IV. DUTIES
OWED BY AN AGENT TO HIS PRINCIPAL: "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 employment
(such as a buyer agency agreement)."
These specific fiduciary duties include:
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Loyalty - "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."
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Obedience - "An agent is obligated to obey promptly
and efficiently all lawful instructions of his principal."
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Disclosure - "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."
This duty specifically obligates a real estate broker
representing a buyer to reveal to the buyer:
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The willingness of the seller to accept a lower price.
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Any facts relating to the urgency of the seller’s need
to dispose of the property.
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The broker’s relationship to, or interest in, the seller
or the property for sale.
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Any facts affecting the value of the property.
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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.
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Any other information that would affect the buyer’s
ability to obtain the property at the lowest price and on the most favorable
terms.
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Confidentiality- “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.”
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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 duly 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."
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Accounting - "An agent is obligated to account
for all money or property belonging to his 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 or affairs."
From Section VI. UNDISCLOSED DUAL AGENCY: A BREACH OF AN
AGENT'S DUTY OF LOYALTY: "An agent's duly of loyalty compels him to refuse
to accept any employment that would require him to act contrary to, or in
competition with, the interests of his principal. Buyers and sellers of
real estate are deemed by law to "compete" with one another and to have
"adverse" interests. Accordingly, a real estate broker who acts as an agent
for both a buyer and a seller in the same real estate transaction is a dual
agent. A real estate broker who acts for both the buyer and the seller and
does not clearly disclose his status to both parties and receive their informed
consent to the arrangement is an undisclosed dual agent. Undisclosed dual
agency is universally considered to be a breach of an agent's duty of loyalty
to his principal. It is also considered to be an act of fraud and is a violation
of the real estate license law of many states."
"Although disclosed dual agency relationships are technically
lawful, there are compelling reasons real estate brokers should avoid creating
them (and buyers and sellers should avoid consenting to them). Courts are
very strict concerning the degree of disclosure necessary to make a real
estate broker's dual agency lawful. For example, a lawful dual agent must
explain carefully to both the buyer and the seller that he is also acting
as a fiduciary for the other party and owes both of them the full range
of fiduciary duties (with the exception of loyalty and full disclosure).
The real estate broker must also ensure that both the buyer and the seller
understand that by consenting to the dual agency arrangement, they each
are forfeiting their right to receive their agent's undivided loyalty."
"Without this comprehensive disclosure and each principal's
informed, and preferably written, consent, the dual agency will still be
deemed undisclosed and therefore unlawful. Dual agency is a totally inappropriate
agency relationship for real estate brokers to create as a matter of general
business practice. Undisclosed dual agency is a clear breach of a broker's
fiduciary duty to each of his principals and is generally viewed to be an
act of fraud. The disclosures and consents necessary to make a dual agency
lawful are so comprehensive and specific that a typical real estate broker
cannot undertake them as a matter of routine."
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