When working with a real estate agent, it's important to understand the level of responsibility they have toward you as their client. In almost all cases, when a seller lists their home with an agent, an agency relationship is formed, meaning the agent owes the seller a fiduciary duty - a high level of care and loyalty.
The same can apply to buyers when they enter into an agency agreement with their agent. However, some agents may work with buyers without an agency relationship, which means they are not required to act as fiduciaries.
Since each state determines its own agency laws, it's essential to know what kind of representation you're receiving.
Reasonable Care: The Basic Standard
At a minimum, all real estate agents must provide reasonable care, meaning they must perform their job competently and ethically. This includes:
- Providing accurate information about the market
- Assisting with paperwork and transaction details
- Meeting deadlines and following legal requirements
Agents working with buyers without an agency relationship are still required to follow state laws and act professionally but are not obligated to provide fiduciary-level loyalty, confidentiality, or full disclosure.
Example: A buyer is casually working with an agent who has not signed a formal agency agreement. The agent helps them view homes and answers questions but does not advise on negotiation strategies or disclose details about the seller's motivation. This is because, without an agency agreement, they are not required to act in the buyer's best interest.
Fiduciary Care: The Highest Level of Representation
When an agent has an agency relationship with a client, whether a seller or a buyer, they owe them fiduciary care - meaning they must act in their best interests at all times. This includes:
- Loyalty ... Prioritizing the client's interests above all else
- Full Disclosure ... Sharing all relevant information, even if it affects the agent's commission
- Confidentiality ... Keeping sensitive client details private
- Avoiding Conflicts of Interest ... Ensuring no actions benefit the agent at the client's expense
Example for Sellers: When a homeowner lists their property with an agent, that agent must act in the seller's best interests�pricing the home strategically, marketing it effectively, and negotiating the highest possible price.
Example for Buyers: A buyer who signs an agency agreement with an agent can expect full loyalty, negotiation strategies tailored to their best interests, and transparency about market conditions.
Why This Matters for Buyers and Sellers
In most instances, for sellers, an agency relationship is standard, ensuring full fiduciary protection from their listing agent.
For buyers, agency agreements secure a higher level of representation, ensuring their agent negotiates the best price, provides inside market knowledge, and advocates for them at every step. Without an agency agreement, buyers should not expect the same level of loyalty or disclosure.
Know Your Agency Relationship
Before working with an agent, ask:
- Will you act as my fiduciary agent or just provide reasonable care?
- What level of loyalty, disclosure, and confidentiality can I expect?
- What agreements are required in my state before we move forward?
Understanding the difference between reasonable care and fiduciary care ensures you make informed decisions when working with a real estate professional. If you're planning to buy or sell, let's discuss how I can represent your best interests every step of the way.
Real estate agency laws vary by state, and the level of care and representation you receive depends on the type of agency relationship established. Before entering into a written agreement, your agent can explain the specific duties they owe you, including whether they will provide fiduciary care or reasonable care based on your agreement. It is always recommended that buyers and sellers fully understand their agency relationship and the obligations it entails before proceeding with any real estate transaction.
If you have any questions about how agency representation works in your state, your real estate professional can provide guidance tailored to your situation.
