Real estate agent’s highest duty is to counsel and explain
Hire a knowledgeable, honest, and aggressive real estate agent, is basic advice for sellers and buyers.
But then the questions start popping up, such as “What duty does my agent owe me as either a seller or buyer?” or “Where can I go to find out what duties my agent owes me?”
Every real estate license in California is subject to the rules and regulations of the state’s Department of Real Estate. The department publishes an annual reference book that real estate professionals must understand to pass their licensing examination.
Referenced responsibilities
The long list of duties an agent to his or her principal (either the buyer, seller, or both) are on Page 196 in the current reference book. The most important duty – one that is sometimes overlooked by real estate licensees – is “the duty to explain and counsel about that which has been disclosed thereby helping the principal make an informed and considered decision to buy, sell, lease, exchange, borrow, or lend.”
This is known as a “fiduciary” duty. In other words, a real estate broker’s or agent’s duties to their principal is the highest duty known in the law.
Experienced and honest real estate agencies understand this. Unfortunately some do not and, as in every profession, some agents ignore the facts that they should advise, counsel and explain to you what is important in the real estate transaction.
Individual circumstances
Of course what is important will depend on the facts of each deal. It also depends on the knowledge and experience of the seller or buyer. It may also be contingent upon the questions the buyer or seller asks about the property and the terms of the deal.
Many of the leading texts say the broker or agent must place him or herself in the shoes of his or her principal (either the buyer, seller, or both) and ask what type of information is necessary for the principal to make a well-informed decision. Obviously duty requires an investigation – a determination of what facts are material, or what might reasonably be discovered by the broker.
What gets missed by some agents in that their duty is not only to disclose facts but also determine what facts are important to the principal’s decision. Cases have clearly held that disclosure of information by itself is not sufficient to satisfy your agent’s fiduciary duty. It is important that the buyer or seller understand the information and its significance.
For instance, you are buying a home. You have an agent and the seller has an agent. The seller discloses on the Transfer Disclosure Statement that the home is in a flood plain. Case law says that the seller has fulfilled his or her duty.
The seller does not have an obligation to inform you about the legal and practical effects of this factual matter. Your agent, however, does.
He or she at least has a duty to advise you to investigate the ramifications. You might want to know when was the last flood; has the home ever been damaged by a flood; are there any special governmental ordinances or regulations governing the home because of the designation?
Your agent may not be able to answer some of these questions but he or she should refer you to where you can get the information before completing the purchase.
Every real estate agent has to be loyal. Every agent must make full and complete disclosure of material facts. And every agent must act fairly and honestly.
The knowledgeable professional will also understand that the duty to explain and counsel is of the utmost importance in modern real estate transactions.
Ron Rossi is a San Jose attorney. Write him in care of the Mercury News