In buying or selling real estate, most people use the services of one or more real estate agents. It is important to understand the relationship of the various agents, and to whom they owe a fiduciary duty, and to those who are not represented.
Florida law assumes that real estate licensees are acting in the capacity of transaction brokers, unless a single agency relationship is entered into in writing. Transaction brokers give limited fiduciary duties. For example, the agent must act honestly and fairly in a real estate transaction. More-over, an agent may not disclose to a buyer what the seller will accept, nor can the agent disclose to the seller what a buyer is willing to pay.
Time and time again I hear agents on the telephone making an appointment to show property with a client, when in fact, there is no client relationship. An agent who represents the client, or principal, has a fiduciary responsibility to the principal, and acts on behalf of the principal. These responsibilities would include care, obedience, loyalty, disclosure, accounting, and confidentiality. The customer is the other party to the transaction who is not represented by the agent. When an agent acts in the capacity of transaction broker, no fiduciary duties are extended to the buyer or seller.
When an agent represents the client, the agent must exercise CARE in effecting a legal transaction to the best of his or her ability. The principal hires the agent for his expertise in the real estate market, and to follow the law to finalize the purchase or sale of the real estate. The agent must OBEY every lawful instruction of the principal.
LOYALTY means that the agent must place the principal's interest above all others even his or her own. If there is a conflict of interest, it is the duty of the agent to divulge it to the principal. DISCLOSURE is the duty of the seller's agent, and the seller, to disclose any information that is known or should have been known that may affect the value of the property, including latent defects, which are defects that would not be readily observable from a simple examination of the property. Agents may exaggerate any aspect of the property, n what is known as puffery, as long as it is an opinion and not a false statement. Any statements made by the principal or the agent that are known to be false and that adversely affects the customer may constitute fraud. Agents must also avoid negligent misrepresentations, which are statements that the agent should have known to be false.
CONFIDENTIALITY requires that the agent not discuss with anyone, other than the principal, any facts that need not be disclosed and that may negatively affect the real estate transaction for the principal. When representing the seller, the agent must disclose everything he or she knows about the buyer. ACCOUNTING is the requirement to document all monies paid or received in the transaction by the agent, including earnest money, which is the money paid by the buyer to the seller to secure the transaction, and which is forfeited if the buyer defaults.
An agency relationship is terminated by fulfillment of the contract; expiration of the contract; or by mutual agreement. The relationship will also be terminated if the contract cannot be fulfilled, such as when the property is destroyed or condemned, or if the principal or agent dies or is incapacitated, if either party breaches the contract, or the principal declares bankruptcy. The confidentiality owed by the agent to the principal does not terminate in Florida when the agency relationship ends.
Mario D'Artagnan is a broker associate with The Jim Fischer Team at Gulf Coast Realty Network. Mario is a former Florida Real Estate Commission investigator, a former real estate instructor, and a published author. Mario is also a U.S. Air Force veteran. For more information or questions, contact Mr. D'Artagnan at: mariodartagnan@yahoo.com, or call 239-565-4445.
