What Are My Real Estate Agent’s Obligations to Me?
When you hire a real estate agent to represent you in buying or selling a home, you are entering into a type of legal relationship called a “principal-agent relationship,” or “agency relationship.” This agreement imposes upon the realtor a specific set of duties, to which they are legally bound, generally called “fiduciary” duties.
Consider your normal, everyday interactions. While most of us feel that the moral choice is to act in the best interest of others whenever possible, no one is under a legal obligation to do so within the course of a casual interaction. For example, if you purchase an item at a yard sale, the seller is not legally obligated to disclose material facts about that item. Neither are you required to disclose to them that the boring old vase that they are selling is actually a priceless artifact!
However, a principal-agent relationship does not work this way. Your agent is legally required to act with your best interests in mind. The following standards are expected of real estate agents:
Your interests come first. For example, if you’re selling a home, your agent cannot convince you to sell the home to their friend at a drastically reduced price. Their duty is to you, the seller, and they should endeavor to obtain a fair selling price and terms – not terms that benefit someone else.
Confidentiality. In the course of a principal-agent relationship, your realtor might learn sensitive information about you (for example, your financial details). This information generally cannot be disclosed to others without your permission.
Obedience. For the most part, your agent must follow the terms you set for selling your home, regarding price or certain other procedures. However, the Fair Housing Act does take precedence here, so you can’t forbid your real estate agent from selling your home to a particular buyer on the basis of race, religion, family status, or disability. Additionally, the agent is bound to follow California law and Realtor® ethical obligation.
Disclosure. Your realtor must disclose to you any information that furthers your interests. At the same time, he or she cannot use their knowledge or experience to your detriment. You have your own disclosure obligations to the buyers, if you are a seller.
Competency, care, and diligence. If your agent is not competent in some area of real estate transactions, he or she must inform you of this fact.
Accounting. If, in the course of a transaction, a real estate agent manages any aspect of your assets or money – something that typically will NOT happen – they must follow specific guidelines with regards to accounting. At all times your agent should be able to inform you of any details regarding the management of your assets.
These requirements are all a part of your real estate agent’s “fiduciary duties” as mentioned above. Depending upon exact circumstances, violation of fiduciary duties can result in fines, compensation to you, denial of commission, or even criminal charges. If you need more information about this relationship, speak with one of our real estate attorneys for more detailed information.