A Brief Primer on the Fiduciary Duties of Real Estate Brokers
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n my time as an attorney, the longrunning joke about real estate brokers is they only care about one thing—their commission. If you just chuckled, then you know what I am talking about. Fortunately, most real estate brokers are not quite so avaricious. But even the most ethical real estate brokers can make mistakes. This article will provide an overview of the fiduciary duties real estate brokers owe to their clients and how it benefits us, legal practitioners, to remind them of those obligations.
Josh Crowfoot is the founder of Crowfoot Law Firm and chairs Young Lawyers Network and the Assignment and Subleasing Committee for the Leasing Group. He also edits RP books and recruits authors to write for the Section.
How Real Estate Brokers Violate Their Fiduciary Duties Real estate brokers have fiduciary duties to their clients. Black’s Law Dictionary defines a “fiduciary” as “[a] person who is required to act for the benefit of another person on all matters within the scope of their relationship; one who owes to another the duties of good faith, trust, confidence, and candor.” Black’s Law Dictionary 702 (9th ed. 2009). The relationship between a real estate broker and a property owner for whom the agent has by contract agreed to sell the owner’s property is that of principal and agent. In the words of one court, a real estate broker “owes a fiduciary duty (1) to use reasonable care, skill, and diligence in procuring the greatest advantage to his client, and (2) to act honestly and in good faith, making full disclosures to his client of all material facts affecting his interest.”
Vogt v. Town & Country Realty, 231 N.W.2d 496, 501 (Neb. 1975). A real estate broker fulfills his duties of reasonable care, skill, and diligence when he performs his role in the real estate transaction in a competent manner that conforms with the standard of the profession when he uses knowledge and takes action learned from his professional education and experience and when he diligently pursues facts and information that assists the client. In addition, a real estate broker must act honestly and in good faith, but it goes beyond that. The real estate broker has a duty of loyalty to his client. The real estate broker must put his client’s interest above his own. Finally, the real estate broker must disclose any fact material to the client’s decision to purchase or sell real estate. A breach of a real estate broker’s duty of care would be not taking reasonable
Published in Probate & Property, Volume 37, No 5 © 2023 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 44
September/OctOber 2023
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By Josh Crowfoot
