The Town Broker

Is Your Agent Following The Law?

When I was 18, I bought my first set of wheels. It was a 1969 Rambler Sedan. My friends and I called it “The Midnight Rambler” in deference to the Rolling Stones song that came out in the same year. It was an old car when I got it…having been in our family for over 10 years. (I think I bought it from a cousin for about $350).  I think about that car often…not only because it was the only car I’ve ever owned that had a manual 3-speed shift on the steering column…but because being an old car, it helps me remember my fiduciary duties to my clients.

Fiduciary Duties and the Acronym Old Car.

As a real estate agent, we have specific legal responsibilities to our clients. These are known as  fiduciary duties. The acronym Old Car can be used to represent the 6 fiduciary responsibilities that all real estate agents owe to their clients. I’d like to outline them here. (And please understand that a client is someone who has entered into an agreement for representation by the agent, either as a buyer or a seller. The agreement is typically written, although there are some instances where it can be created orally. A customer is someone that the agent interacts with, and is  not necessarily owed any fiduciary responsibilities.)

Here’s the 6 fiduciary duties that agents owe to their clients:

O – Obedience. Simply put, an agent must follow the instructions of their client. The only exception to this rule is if the instruction is to do something which is illegal.

L – Loyalty. An agent must keep their clients interest ahead of those of any other party, including themselves.

D – Disclosure. In NJ, and agent must disclose all material facts to their clients (material fact being defined as anything that could influence their buying or selling decision). An agent is also obligated to disclose any information that they learn that could be of benefit to their client in the transaction, or in negotiation.

C – Confidentiality. An agent is obligated to keep confidential everything they know about their client, their motivation, and their personal or financial situation. “Will they be flexible on the price?” is a question I’m often asked. Unless I have my clients permission to tell you, I can’t…and I won’t.  The duty of confidentiality lasts forever. It survives beyond the transaction, and can only be relieved by a court order.

A – Accounting. An agent must be accountable for all documents and funds in the transaction. Accurate record keeping and reporting is a must!

R – Reasonable Care. As a licensed professional, a fiduciary is expected to have sufficient knowledge and experience so they can advise their client without causing harm.

There is a reason that real estate agents are licensed. If their actions are inappropriate, they can cause some real harm to their clients. As an experienced broker, I like to think that I’ve learned and internalized all of these fiduciary duties. But it’s still fun to think about my days in the “Midnight Rambler” to help me remember them!

Tags: agency, fiduciary duty, responsibilities to clients

This entry was posted on Sunday, March 7th, 2010 at 9:48 pm and is filed under Buyers, Real Estate 101, Real Estate Industry News, Sellers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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