What are agent responsibilities?
Agent responsibilities are the duties an agent owes to the principal they represent. When creating an agency relationship, there are generally two parties; the agent, who is the real estate broker, and the principal, who is usually the seller. The principal is also known as the client.
Under the law of agency, once an agency is created, there are specific duties that the agent owes to the client they represent. In this article, we will be covering those responsibilities in detail.
Agent responsibilities owed to the principal:
The following is a list of the agent responsibilities owed to the client which are fully explained. Remember, the client is also known as the principal. Don’t let this trip you up on the real estate exam. Moreover, these agent responsibilities are a must know for the test.
Acronyms are always helpful when you have multiple items to memorize for the exam. In this case, you can use the acronym COALD, which stand for Care, Obedience, Accounting, Loyalty, and Disclosure. As a broker, you never want to violate these responsibilities.
Care – 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. Because of their 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 their superior skill and knowledge while pursuing their principal’s affairs. This duty includes an obligation to affirmatively discover facts relating to their principal’s affairs that a reasonable and prudent real estate broker would be expected to investigate. This is the same duty any professional, such as a doctor or lawyer, owes to their patient or client.
Obedience – An agent is obligated to obey promptly and efficiently all lawful instructions of his principal. However, this duty does not include an obligation to follow any unlawful instructions; for example, an instruction not to market the property to minorities or to misrepresent the condition of the property. Compliance with instructions the agent knows to be unlawful could constitute a breach of an agent’s duty of loyalty.
Wait, there’s more? Yup, keep reading.
Accounting – An agent is obligated 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 assigned to them that relate to their client’s transactions or affairs.
Loyalty – A duty of loyalty is one of the most fundamental fiduciary duties owed by an agent to their 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 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 their principal’s affairs. Thus, a real estate broker’s duty of loyalty prohibits them from accepting
employment from any person whose interests compete with, or are adverse to, their principal’s affairs.
A classic example of breach of this duty of loyalty by a real estate broker is a broker who purchases a property listed with their firm and then immediately resells it at a profit. Such conduct ordinarily is entirely appropriate and lawful by persons acting “at arm’s length.” However, a fiduciary will be deemed to have “stolen” a profit opportunity rightfully belonging to their principal and thus to have breached his duty of loyalty.
It doesn’t end there. There’s more!
Disclosure – An agent is obligated to disclose to their principal all relevant and material information that the agent knows and that pertains to the scope of the agency. The duty of disclosure obligates a real estate broker representing a seller to reveal to the seller:
– All offers to purchase the seller’s property.
– The identity of all potential purchasers.
– Any facts 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.
– The broker’s relationship to, or interest in, a prospective buyer.
– A buyer’s intention to subdivide or resell the property for a profit.
– Any other information that might affect the seller’s ability to obtain the highest price and best terms in the sale of his property.
A real estate broker representing a buyer is obligated to reveal to the buyer:
– The willingness of the seller to accept a lower price.
– Any facts relating to the urgency of the seller’s need to dispose of the property.
– The broker’s relationship to, or interest in, the seller of the property for sale.
– Any facts affecting the value of the property.
– 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.
– Any additional information that would affect the buyer’s ability to obtain the property at the lowest price and on the most favorable terms.
CAVEAT: An agent’s duty of disclosure to his principal must not be confused with a real estate broker’s duty to disclose to non-principals any known material facts concerning the value of the property. This duty to disclose known material facts is based upon a real estate broker’s duty to treat all persons honestly and fairly. This duty of honesty and fairness does not depend on the existence of an agency relationship.
Wow, that’s a lot, but we’re not done yet.
What duties or responsibilities are owed to the customer?
First off, who is the customer? The customer is the third party to a transaction. So, if you as a broker are the agent of the seller of a property, the seller is the principal, and the buyer is the third party, who is known as the customer. An agent owes the customer duties or responsibilities as well, but luckily the list isn’t nearly as long.
Brokers have responsibilities imposed by the law to act with honesty and fair business dealings, with skill and care, and with proper disclosure of known facts. There is the potential for being liable for fraud or misrepresentation, and brokers must be knowledgeable of the type of conduct they may and may not use.
So, in conclusion…
You need to know which agent responsibilities or duties are owed to who, and specifically what they are and what they mean. No one said getting your license would be easy, did they?
What else can help me prepare to pass my real estate licensing exam on my first attempt?
Other tips to help you pass your real estate licensing exam on your first attempt:
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