Understanding the Fiduciary Requirements of a Real Estate Agent

Real Estate Fiduciary Meaning

What is fiduciary duty?

It's an obligation that occurs across many industries and situations, applying to executors of estates, financial advisors, attorneys and trustees for trusts. In a broad sense, fiduciary duty means that the person who has it must act in the best financial interest of the person or organization they are representing. Failing to uphold one's fiduciary duty can have serious consequences, including legal ones.

Do real estate agents have a fiduciary duty?

The answer is yes, and a real estate agent who violates this duty could face a lawsuit and loss of license. In fact, a real estate agent must put a client's best interests above their own. Practically speaking, the fiduciary duties of a real estate agent include the requirements below.

Real Estate Agents and Fiduciary Duties

Real estate agents have six fiduciary duties: obedience, loyalty, disclosure, confidentiality, accounting and reasonable care. These are easily remembered with the acronym OLD CAR, so if you think your real estate agent might not be acting in your best interest, think about this phrase to help you remember their obligations to you. These are broad categories, however, so it is helpful to break them down to better understand them in the context of a real estate agent's profession.


A real estate agent is required to do what you ask of them. However, this does have limits. Fully understanding the fiduciary requirements of a real estate agent also means being conversant with legal requirements. The agent is not required to carry out any unlawful demands that you make of them. So, before you fire your agent for not agreeing to something you've asked them to do, make sure that you are well within your rights.


What are the fiduciary duties of a realtor when it comes to loyalty? Your real estate agent doesn't have to send you Christmas cards for the rest of their life or attend your child's high school graduation. They are required to act in your best interests at all times regarding the sale of a house, even if that is in conflict with their own interests. This is one of the most fundamental of real estate fiduciary duties.


Disclosure requirements can be confusing and may vary from state to state, so don't assume that what your realtor had to inform you about in the last place you lived applies in your new area. However, there are some basic guidelines that all real estate agents must follow depending on whether you're buying or selling a house.

As the seller, the agent must let you know if they have a relationship with the buyer. This protects you from being an unwitting seller in a nice deal for the buyer when the buyer is actually the agent's brother-in-law or best friend from high school. The real estate agent is also required to let you know who the people are that have placed a bid on your house and what those bids are. If a potential buyer is interested in reselling the house at a profit or dividing up your beautiful large lot into individual parcels, the agent must inform you. If there is something that would affect your house's value, especially something that would increase that value, they must also inform you. Finally, if an agent learns of a buyer's interest in offering more money for the house, they have to tell you.

An agent representing the buyer has a different set of obligations. If you're the buyer, they have to tell you if this represents an urgent sale on the part of the sellers, how long the house has been on the market and if there are other offers, including past offers. They must tell you if the seller may go lower than the asking price, and they also have to let you know if they obtain information that would help you drive that price down. They must disclose information that affects the property's value, and finally, as with the agent-seller relationship, they have to tell you if they have a relationship with the seller.


This boils down to keeping any information quiet that the agent is not required to disclose if it would have a negative affect on the client's ability to negotiate. If the agent knows that as a seller, you'd be willing to go down on the price a little, the agent should not reveal this to the buyer or the buyer's agent. Confidentiality is forever, including after closing. The only situation that could result in a violation of this confidentiality is a judge's order.


The phrase "fiduciary duty" sounds like it's about money, and here is where the cash part comes in. Agents have to keep careful, accurate financial records and must not blend a client's money with other funds, whether personal or business. Deeds, documents and anything of value should be protected under this duty.

Reasonable Care

Even real estate agents can't perform miracles, but they are expected to show reasonable care in looking after your interests. From a legal standpoint, "reasonable care" usually involves a comparison with industry standards. The real estate agent should be getting as much information as they can to help their clients. They should provide assistance that is based on their professional knowledge and expertise and that goes above and beyond what a layperson could provide. As a client, you have a right to expect competent performance from your realtor.

Consequences of Violating Fiduciary Duties

There are a number of different remedies that may occur if you are working with an agent who does not uphold their fiduciary duties. They could be required to pay for any damages resulting from their actions or return a commission. A rescission could occur, meaning that a sale is canceled entirely and buyers get their money back.

Buying or selling a home can be a very stressful process. In the former situation, you are putting down a huge amount of money for a place you probably hope to remain in for years to come. In the latter situation, you are depending on your agent to help you get as much money as you can. An agent who does not attend to their fiduciary duties could be financially disastrous for a client. For this reason, it's important to be informed about your rights and know whether your expectations are reasonable so that you can evaluate the performance of the agent you have hired.

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