REAL ESTATE CONSULTANT
“An agent said that we should hire him because he would be a “fiduciary” agent. He explained that this meant he would give us all of the information we would need to make decisions and answer any questions about the sale of our home. Wouldn’t all agents do that?”
A longtime Santa Monica homeowner
The definition of a “fiduciary” comes from the word “trust”. It refers to anyone who holds something in trust – or a trustee. The word “trust” includes a reliance on the integrity of another person, or placing confidence in someone else.
California Civil Code requires that real estate agents give a prospective seller or buyer a “Disclosure Regarding Real Estate Relationships” before a real estate transaction. This includes that “A seller’s agent…has…affirmative obligations: to the seller: a fiduciary duty of utmost care, integrity, honesty and, loyalty in dealings with the seller.” There is also a statement of a Buyer’s Agent’s obligations (which include “fiduciary duty…with the Buyer”). “To the Buyer and Seller: (a) diligent exercise of reasonable skill and care in performance of the agent’s duties, (b) a duty of honest and fair dealing and good faith, and (c) a duty to disclose all facts known to the agent materially affecting the value or desirability of property…”
Finally, there is a section regarding an “Agent representing both seller and buyer.” “A real estate agent…can legally be the agent of both the Seller and Buyer in a transaction, but only with the knowledge and consent of both. In a dual agency situation, the agent may not, without the express permission of the respective party, disclose to the other party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered.”
Most agents will give you information when asked, and certainly should be responsive to client’s requests. However, that is more descriptive of part of an agent’s function, rather than a “fiduciary” level of service.
A “fiduciary” accepts the highest level of responsibility. He or she has to educate and interpret on behalf of their client, not just give information. Also, he or she would properly anticipate a client’s needs, not just respond to them. A “fiduciary” would advise and consult about possible consequences and results of various different courses of actions. A “fiduciary” agent is one who helps guide their clients to different service providers and recommends courses of action that may be of the greatest benefit to their client, be it as a buyer or seller. The “fiduciary” agent is therefore far more involved in a consultant role.
An agent may be most helpful to a client by asking the client what he or she would like to do, and letting the client decide which action they prefer. That agent does not make decisions for a buyer or seller as to what to do.
A “fiduciary” will always place the client’s interests above the interests of all other parties – including the agent’s own interest. This fiduciary role facilitates getting a seller the best price, in the right time, and with a minimum of inconvenience to the seller. In the case of an agent who only responds to a client’s requests and provides basic information, the client’s best interests may not be served. For example, the agent may not counsel the seller on some options or alternatives that may appear to be more difficult or time consuming.
The following is an example of how a “fiduciary” responsibility could occur regarding an agent’s relationship with a buyer. If the buyer has begun negotiating on the purchase of a home and a new listing comes on the market that may better serve his needs, a “fiduciary” will inform the client of the new opportunity, even though that could result in starting the purchase process all over again.
Someone who is planning to sell or buy real estate might include a question about “fiduciary” in the process of interviewing agents. They could ask what each prospective agent thinks about the issues involved and ask for some examples of how they might demonstrate a “fiduciary” level of service.
Michael Edlen of Coldwell Banker has been tracking and analyzing the local real estate market for years, and provides confidential counseling services to prospective buyers and sellers. Most of his business is derived from a referral base of over 900 past clients. More tips and information are available on MichaelEdlen.com. He can be reached at 310.230.7373 or Michael@MichaelEdlen.com.