Six Duties Every Real Estate Agent Owes Their Client, COLD AC

An agent enters into a fiduciary relationship with their client when they sign an agency agreement or also known as a representation agreement. This relationship is a legal relationship which provides for very specific duties owed to the client. Keep in mind, these duties aren’t just moral and ethical in nature but, are as much statutory and legislative as anything else. Two specific types of law are in control of this relationship and they are the Common Law of Agency and Statutory Law. I will discuss those duties below in detail and I strongly recommend that before you enter into any agency agreement with your local licensed real estate professional, you read over these duties and understand them.

Care: The fiduciary duty of care is when an agent is required by law to give his client and the transaction the necessary attention in order to do the job correctly and to avoid any damage or risk to the client. The idea behind this duty is that you, as the client, expect the agent to know more about real estate than the average person on the street. For this reason, the agent should use his knowledge, experience and expertise to your benefit.

When an agent doesn’t exercise reasonable care, a court of law could find that the agent neglected his duty. In situations where the agent was found to be neglectful, the agent could be liable to his client for any loss resulting from the agent’s lack of attention or neglect.

Obedience: The fiduciary duty of obedience is when an agent is required by law to act honestly, fairly and in good faith at all times, obeying the client’s lawful instructions. This duty is fairly self explanatory however, it’s important to remember that this duty is not absolute. The agent doesn’t have to obey any instructions that cause the agent to break the law or violate any moral or ethical standard.

Loyalty: The fiduciary duty of loyalty is when an agent is required by law to place his client’s interest above his own. It has been my experience that this duty always seems to bring the most debate however, the law is very clear. Your agent owes you his loyalty, above his own interest. This brings the most debate because most representation agreement includes commissions that are based on percentages of the gross sales price. In other words, the agent makes more money if he obtains a higher sales price on the home. The reason this can be a source of conflict is that sometimes, getting the most money for a home isn’t the offer that serves the clients best interest. In these types of cases, many agents seem to forget their loyalty duty in an effort to obtain the highest price and therefore, putting their own self interest above their clients. As the agent, we owe our clients absolute loyalty, above our own self interest.

Disclosure: The fiduciary duty of disclosure is when an agent is required by law to keep his client informed of all the facts and any other information that could impact the client. This duty brings in another concept called Material Facts. It’s important to know and understand that the definition of material facts is very broad in order to cover any fact that the client would consider in determining whether or not to engage in the transaction. When you couple the disclosure duty with the care duty, you get an agent who is obligated by law to find the facts that are important to the transaction. In fact, agents can be held liable for any damages relating to not disclosing their knowledge regardless if it’s favorable or unfavorable to their client. The rule of thumb for agents is to disclose everything and if you even have to question whether or not to disclose something, you disclose it.

Accounting: The fiduciary duty of accounting is when an agent is required by law to keep a record and be able to report on the status of ALL funds received on behalf of their client. In many states, agents are required to actually provide accounting records on funds to all parties in the transaction. Here in Tennessee, we are required by law to have funds deposited within certain time frames and they must be deposited into special escrow accounts as to not to co-mingle our client funds with our own.

Confidentiality: The fiduciary duty of confidentiality is when an agent is required by law to keep their clients affairs secret. This is likely the 2^nd most hotly debated duty by agents because, not all agents have the same opinion on what is considered confidential and what isn’t. One of the biggest mistakes agents make in regards to this duty is disclosing their client’s eagerness or willingness to get the deal done. For example, your agent shouldn’t be telling the other party things like, “My client really wants this house and he will do what needs to be done to get it” or “My seller really needs to sell.” Statements like these could potentially give the other party an edge in negotiations and therefore hurt the client. Anything you tell your agent should remain confidential with one exception and that is material facts.

As you can see, working with an agent to buy or sell your home has very specific legal duties that are owed to you by the agent. When entering into a representation agreement, it’s imperative that you know and understand these duties. Knowledge of these duties will help you find the right agent for you and your needs. When selling, buying or investing here in Nashville Tennessee, Liberty House Realty LLC is aware of our duties to you and are ready to help.

This is a guest blog by:

Jesus "Jesse" D. Gonzalez Jr. Realtor, BBB Accredited Business

Principal Broker / Owner

Liberty House Realty LLC

1709 Ridgemere Ct.

Hermitage, Tn 37076

P# 615-424-0961

F# 615-391-4740

Facebook: www.facebook.com/LibertyHouseRealty

E: JGonzalez@LibertyHouseRealtyLLC.com

W: www.LibertyHouseRealtyLLC.com

Designation / Certification: REOPro, RDCPro, NFSTI, PSC Pre-Foreclosure Mastery, PSC HAMP Mastery, PSC HAFA Mastery, PSC FDCPA Compliant, CDAT, HRC, Short Sale Specialist

EMATR Ethics Standard Grievance Committee Member

What I Learned About Real Estate in 2009

I want to start by thanking all of you who have read my blog. So far no corporation has contacted me to ask to advertise on my site because of my incredible readership, but enough of you are reading and commenting to make me feel as if my efforts are worthwhile, so thank you very much.

2009 has been quite a year for real estate. Silicon Valley has seen some changes that many people never saw coming. While some cities were not hit by huge waves of foreclosures or short sales, no place was immune from a drop in value. At the start of the year mortgages, particularly jumbo mortgages were hard to get, but that has passed. While we will never go back to the days where the qualification to get a mortgage was a pulse, there is money available for people with provable income, down payment, and credit. In many areas a flood of foreclosures caused a huge drop in value, followed by a wave of cash rich investors buying up property and the return of multiple offers for well priced homes. In Palo Alto we saw a slower drop in prices, a big increase in inventory, followed by a drop in inventory and now a more balanced market.

I have personally experienced a very different kind of buyer and seller this year, and a change in what is expected of an agent. Some of my personal encounters with buyers:

1. Buyers are better educated than ever before and pay a lot of attention to numbers, values, and market trends. The home of my dream concept has often been replaced by the deal of my dream.

2. Buyers will go to web sites like Zillow and Redfin for information, but many still want the extra help that a local agent can give them to determine value.

3. There is an increase in buyers in think they know enough to attempt to buy a home without using an agent.

4. Buyers who find me on the internet trust me more than buyers I meet at open houses. This is the fact I find more interesting than anything else I have encountered this year. I guess that my writing makes people feel they know me, which I think is a good thing.

My personal encounters with sellers:

1. While selling a home where a bank is involved, ie a REO, has a level of frustration unequaled by any other type of sale, you can be assured that the house is going to be sold at whatever price the market will bear. The bank will not withdraw the listing just because they can not get their expected price.

2. Last Jan short sales had about a 10% chance of closing. I do not know the national average for closings, but most banks are allowing the process to proceed and eventually closing many of short sales rather than foreclosing.

3. Estate sales, whether they are trusts or probates also close. The estate has to sell and will do it at market value and not throw a hissy fit and go home if they do not get what they want. Well, they may throw a hissy fit, but eventually they still make the sale.

4. Individual sellers are still often unrealistic and think their home is worth more than a buyer thinks it is worth. This is nothing new, but what is new is that these sellers now have competition from the above three types of sales so very often an individual seller will just not sell if he or she does not like the market value.

What has not changed for me this year is my belief that real estate is a wonderful long term wealth builder and if you buy a home, pay it off, and have it to live in, rent out, or give to your heirs, it is a smart way to spend your money. I also still believe in the home of your dreams, even if many of my clients do not.

Thank you all for your support and your disagreements, I learn from both.

Marcy Moyer

Intero Real Estate

D.R.E. 01191194

marcy@marcymoyer.com

www.marcymoyer.com

650-619-9285