Do you know your fiduciary responsibilities?
August 21 2018
As a fiduciary, you serve as a trustee, an agent acting on behalf of your client. But what does this mean in terms of your responsibility to the client?
What is the minimum level of service owed?
Fair treatment and honesty are expected. For example, you must comply with all state and federal laws, disclose known material defects and account for all funds received and disbursed. Once the buyer-agency agreement is signed, you're also responsible for performing specific fiduciary duties.
What are fiduciary duties?
Regulations can vary by state, but these are the most common:
- Obedience: You must obey the client's instructions, provided they are in accordance with your agreement and the law.
- Confidentiality: You must protect the client's privacy and refrain from disclosing any information related to their personal affairs and motivations (unless required to do so in a court of law).
- Loyalty: You are obligated to act in the best interests of the client, even when that means putting their interests before your own.
- Disclosure: Agents should provide an account of all transactional research, funds and documents. Disclose any relevant information that could cause the buyer to change their purchase decision.
When is dual agency allowed?
In some states, you may be allowed to represent both the buyer and the seller if both parties give their consent. However, dual agency can create a sticky situation where fiduciary duties are concerned. For example, you must refrain from meddling in negotiations, even if you know the buyer's best offer or the seller's rock-bottom price.
Keep in mind, dual agency may exist even if separate agents within the same firm represent the buyer and seller. Always check with the licensing agency in every state you are licensed in, or speak to your responsible broker to ensure your transactions meet all legal requirements.
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