What is a Real Estate Agent’s Fiduciary Duty?

When you sign on as a real estate agent to help a homebuyer or home seller, you’re then expected by law to take on certain responsibilities for your client. But just what does that mean? What exactly is a real estate agent’s fiduciary duty obligate them to do? 

Keep reading to find out.

What does fiduciary duty mean?

Fiduciary by itself means “faithful servant,” and when it comes to legal matters it means you promise to act in your client’s best interests at all times. 

A fiduciary duty refers to an action or responsibility you promise to uphold for your client. It’s a legal obligation, and it must be upheld if you’re to remain an acting agent for a client and retain your real estate license.

What fiduciary duties does a real estate agent owe a client?

Real estate agents have a total of six fiduciary duties they’re responsible to uphold:

Disclosure: You must always disclose any information to your clients that would help them in negotiating. 

There are two ways to look at this fiduciary duty — from the seller’s point of view and the buyer’s.

When representing the buyer, you must disclose:

      • That the seller has expressed a willingness to accept a lower price than their asking offer
      • Anything that is affecting the value of a property
      • Any past or existing offers or counter-offers that have been made on a property
      • How long a property has been on market
      • Whether the broker has an existing relationship with the seller of a property
      • Seller’s urgency to sell a property
      • Any fact or information that would help the buyer obtain a property for a lower price

When representing the seller, you must disclose:

      • Whether you have a relationship with the buyer
      • The identity of anyone who has placed a bid
      • All offers made on the seller’s property
      • Anything that would affect the value of the seller’s property
      • Whether the buyer is willing to pay a higher price for the property
      • Any information that would affect the seller’s ability to get a higher price for his or her property
      • Whether the buyer has any intention to subdivide the seller’s property or resell it for a higher price

Accounting: You must never combine funds received from a client into your personal or business funds. All funds must be kept separate. This fiduciary duty also extends to any property, deeds, or other documents entrusted to you by the client. Essentially anything entrusted to you by the client must be protected.

Loyalty: As an agent, you must always put your clients’ interests above your own. This duty is considered to be one of the most fundamental duties of a real estate agent.

The application of this duty can be interpreted a few different ways. For example, it can prevent you from taking employment from a person or agency whose interests are in direct competition with your initial client. Another example would be if you were to buy and resell a property your client had expressed interest in.  

Care and Diligence: You must always use all of your skills to the best of your ability for the client. 

This fiduciary duty basically boils down to competence. As an agent, are you doing everything in your power to help the client achieve their aim? Are you diligently pursuing facts and information that would help the client? What are you doing that the average person doesn’t have the skill or know-how to do themselves?

Confidentiality: Any information given to the client in a confidential manner must be kept confidential if that information would hurt the client during any round of negotiations. 

If you’re representing the buyer, for example, you must keep secret from the seller and the seller’s agent that your client is willing to pay a higher price for the property.

Obedience: You also must obey any lawful orders your client gives you. Conversely, you’re not bound by any unlawful requests made by the client. For example, you’re under no obligation to disclude a property from someone because of their race or gender.

What happens when a real estate agent neglects their fiduciary duties?

There are a few things that can happen when you don’t perform your duties as a real estate agent. The extent of the penalty, however, will be determined by a judge and court of law. 

Loss of Commission

If you’re remiss in your duties, you can be required to forfeit any compensation received as the buyer’s or seller’s agent. This means that, even if the sale of the home has since been completed, you would still have to return any commission you received from working with the client.

Pay for Damages

You may be responsible for any damages dealt upon your client’s principal as a result of any neglect or irresponsible actions. For example, if a seller is not told of a higher bid on his house, you would have to pay the difference between the two offers.


A rescission means that all properties may be restored to their previous states before any contracts were signed or agreements were made. Should a rescission occur, this means that a property could be completely returned to the seller, and the buyer would receive a complete refund.

Bottom Line

As a real estate agent, you should always be aware of your fiduciary duties to your clients. It’s a major responsibility and upholding these duties is crucial to developing a strong reputation.

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