Chapter 3
Definition of Fiduciary Duties

Learning Objectives:  What is a fiduciary duty?
                                       How does CARLOAD pertain to agency?
                                       What duties are owed a client?
                                       What duties are owed a customer? 

What is the definition of fiduciary:  a relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent. 

The real estate agent owes a fiduciary duty to the principal, who is the client.  Remember the acronym CARLOAD and you will be able to remember the 7 elements of fiduciary: 

     · Confidentiality          
· Accountability
· Reasonable Care
· Loyalty
· Obedience
· Advocacy
· Disclosure 

Confidentiality:  The duty of confidentiality requires that the real estate agent maintain information received from the client in confidence.  This becomes especially important during negotiations on price, but may come into play throughout the closing process. 

Confidentiality Example:  The seller tells the listing agent that he would accept a contract for $25,000 less than the asking price, but is hoping to get more.  A prospective buyer asks the listing agent, at an open house, how much the seller will come down on the price.  

What should the listing agent say? 

The listing agent should honor the fiduciary duty of confidentiality to the seller and should not disclose what price would be accepted.  The listing agent should stand behind the list price and point out the benefits of the home.  
 

Accountability:  The duty of accountability requires that the real estate agent has an obligation to the client for all funds received on behalf of the client.  A fully completed purchase contract with an earnest money deposit should be presented to the seller as soon as possible.  After the seller accepts the contract, the broker has 5 days to approve it.  

Accountability Example:  A purchase contract is signed by the buyer and the earnest check is attached.  The selling agent realizes after the buyer leaves the office that the buyer did not sign the check for the earnest money.  The selling agent would like to submit the offer to the listing agent and worry about the signature later, before another offer is accepted.