Understanding Agency Relationships


An agency relationship is the fiduciary relationship resulting when a person (the agent), represents the interests of another person, (the principal or client), in dealings with others.
 

In an agency relationship, the real estate licensee owes certain fiduciary duties to the principal. The traditional fiduciary duties include: loyalty, obedience, disclosure, confidentiality, reasonable care and diligence, and accounting.

 The Fiduciary Duties of an Agent
Every agent owes certain fiduciary duties to the principal (client).
Traditionally, these duties include: 

1. Obedience: To obey promptly all lawful instructions of the principal.
    
2. Loyalty: To act at all times in the best interest of the principal and to put those interests above all others, including yourself.
    
3. Disclosure: To disclose all known, relevant facts to the principal.
    
4. Confidentiality: To safeguard the principal's secrets, unless keeping the confidence would violate disclosure requirements about the property's condition.
    
5. Accounting: To account for all funds and property entrusted by the principal.
    
6. Reasonable care and diligence: To diligently use real estate skills and knowledge when pursing the principal's affairs.

The standard of care expected of a buyer's or seller's Broker (Agent) is that of a competent real estate agent Broker (Agent). By reason of his or her real estate license, a real estate licensee is considered to have skill and expertise in real estate matters superior to the average person. If a principal raises a concern that is outside the scope of the licensee's responsibility, the licensee should acknowledge that fact and suggest that the principal seek assistance from a reliable outside source.