A principal is owed what fiduciary duties by an agent?
Fiduciary duties are duties owed by a fiduciary, who is a person put in a position of financial trust when handling other people’s money or property. In real estate, a fiduciary can be a real estate licensee or broker (agent) working on behalf of a principal (seller).
There are many duties an agent owes a principal. Additionally, when dealing with a customer, such as a seller, there are duties an agent owes as well.
What are some examples of fiduciary duties?
One example of a fiduciary duty is the requirement that a real estate licensee is supposed to forward any earnest money received to their broker. Once received a broker is required by law to deposit it in either an escrow or trust account. To deposit the earnest money anywhere else would be a violation of their fiduciary duty, and a violation or real estate law. This violation could lead to suspension or revocation of the broker’s license, a fine and a potential lawsuit from the buyer.
Are there any other breaches of fiduciary duties you need to know for your exam?
Yes, the exam will likely ask you about two breaches of fiduciary duty. Let’s say I am a licensee representing the listing broker and you make an offer on my listing. You give me a $1,000 earnest money deposit. Instead of forwarding it immediately to my broker, I deposit it into my checking account. This scenario is known as commingling. A must know for the real estate licensing exam. The same would be true if a broker deposited earnest money into an operations account.
What if in the above example I not only deposited the check into my account but I used the money to go to Las Vegas. Conversion is my use of your money. I have converted your money into my personal use, which is a big no-no.
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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