Is a listing broker or salesperson required by law to respond, either verbally or in writing, to each and every offer received? The purpose of the next section is to answer the above questions by examining a licensee’s duties when representing a principal in a real estate transaction. Discussion of Agency, Fiduciary Duty, and California Law The concepts of agency and fiduciary duty apply to the relationship that exists between a real estate licensee and his or her principal in a real estate transaction. An agency relationship, as defined by Section 2295 of the California Civil Code, exists when an agent represents another, called the principal, in dealings with third persons. In most real estate transactions, a real estate broker acts as an agent for his or her principal. It is precisely this “agency relationship” that creates and requires a fiduciary duty of utmost care, integrity, honesty, and loyalty owed by the agent to the principal within the course and scope of the agency and the authority granted by the principal. Once an agency relationship exists, an agent is bound by law to uphold and perform certain statutory duties as a fiduciary in a real estate transaction. Fiduciary duties impose the highest standard of care on real estate licensees. These duties include, among others, confidentiality, the exercise of utmost care, full and complete disclosure of all material facts, the obligation to account to the principal, and the obligation to act fairly, honestly, and without fraud or deceit. Fiduciary duties are grounded in both statutory and regulatory law, as well as case law. Some of the fiduciary duties have been codified in certain California statutes and regulations that are enforced by the CalBRE. For example, the duties that prohibit an agent from obtaining any advantage over the principal and require that an agent disclose all material information and act in his or her client’s best interests are incorporated into Section 10176 of the Business and Professions Code. This code section addresses secret profits or undisclosed compensation, misrepresentation of material facts, and fraud or dishonest dealing. For the purposes of this article, it is imperative to emphasize the importance of a licensee’s duty to fully and truthfully disclose all material facts concerning a real estate transaction, especially information that might impact the principal’s decision. It is within the scope of a licensee’s duty of full disclosure that a licensee must present all offers and counteroffers in a timely and diligent manner to his or her principal, unless his or her principal has specifically directed the licensee to do otherwise. For example, a real estate licensee cannot select offers based on his or her own self interests, but instead must promptly, obediently, and efficiently follow the lawful instructions of his or her principal and uphold the principal’s best interest at all times. Equally important, a real estate licensee is required by law to disclose the nature and full amount of any compensation, commission, or profit that he or she will receive from the transaction. Real estate licensees must fulfill these statutory duties, and any intentional neglect or fraudulent conduct related to the same could result in administrative, civil and/or criminal action against them.
Posted on: Sun, 01 Dec 2013 04:57:02 +0000
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