Wednesday, June 22, 2016

Does Your Realtor Have a Fiduciary Duty?

by Osman Parvez
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Have you seen John Oliver's piece on investment advisers and fiduciary duties? You should. It's long, so pour yourself a cup of ginger chai and take a look. It's worth it. 





When I first started in real estate, my boss made it clear that we had a fiduciary duty to our clients. It was one of the big differences between us and other firms. 
A fiduciary has a duty to act solely in another party's interests. 
When I started my own company, I carried forward this principle. It's hard wired into my business practices and the ethics, and it's the cornerstone of our values at Realty Unique. 

When you sign an exclusive agreement with your real estate agent in Colorado, the combination of Uniform Duties (Section 5) and Additional Duties (Section 6) add up to one thing: a fiduciary duty.   

Duties of a Buyers Agent (from the Exclusive Right to Buy Listing Contract):
6.1. Promoting the interests of Buyer with the utmost good faith, loyalty and fidelity. 
6.2. Seeking a price and terms that are acceptable to Buyer. 
6.3. Counseling Buyer as to any material benefits or risks of a transaction that are actually known by Broker. 

Duties of a Listing Agent (from the Exclusive Right to Sell Listing Contract): 
6.1. Promoting the interests of Seller with the utmost good faith, loyalty and fidelity.
6.2. Seeking a price and terms that are set forth in this Seller Listing Contract.
6.3. Counseling Seller as to any material benefits or risks of a transaction that are actually known by Broker.

Sadly, many Realtors still don't understand their fiduciary duties and often act in their own best interest ahead of their clients. I've seen buyers agents and listing agents compromise their clients in all sorts of ways. It's so typical that it's become almost routine.  In most cases, the client never even finds out.

A Realtor's duty is clearly that of a fiduciary. If your broker doesn't understand that, get a better one.


A Game of Risk Avoidance
An agent with a deep and abiding respect for fiduciary responsibility can help you avoid common risks:

Seller Risks 
  • Poor marketing 
  • Mishandled negotiations
  • Mishandled contracts and disclosures
  • Money left on the table
  • Increased liability
Buyer Risks
  • Poor location selection
  • Over paying
  • Poor property selection
  • Incomplete due diligence
  • Mishandled negotiations
  • Obvious inspection related issues
  • Waived contingencies 

Additional Reading
Is Your Financial Adviser a Fiduciary
Fiduciary Duties of a Realtor
6 Fiduciary Duties of a Realtor

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

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