Fiduciary Duties/ Agency Law and Ethics

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As a Real Estate Agent, your fiduciary duty to your client is held to a higher standard than most industries by way of  the Code of Ethics embodied in the Golden Rule, “Whatsoever
ye would that others should do to you, do ye even so to them.”  We will talk about this later in the course.  The Arizona Administrative Code for the State Real Estate Department holds us to rules  that makes sure we are filing our documents on time and protecting and promote the client’s best interest.

A broker’s or agent’s services must conform to the standard of professional community for the specific real estate discipline. Pursuant to Commissioner’s Rule R4-28-1101 (H): A salesperson shall not undertake to provide professional services concerning a type of property or service that is outside the salesperson’s field of competence: unless they are engaging the assistance of a person who is competent to provide that service or the salesperson discloses to the client in writing and the clients employs the agent subsequently.

Quick Quiz

Fill in the Blank:
A broker’s or agent’s services must to the standard of community for the specific real estate discipline.


One of our fiduciary duties to our clients is obedience. The word fiduciary was first used way back in 1641 and comes from the Latin word fiduciarius meaning confidence or trust. You would need to do anything they request of you within your scope of knowledge in real estate as a licensee and as long as it is ethical and lawful to do so. An agent is obligated to obey promptly and efficiently all lawful instructions of his principal. However, this duty plainly does not include an obligation to obey any unlawful instructions; for example, an instruction from the principal to not market the property to minorities or to misrepresent the condition of the property would not obligate the agent to follow through with this instruction.

Another example: The seller requests that you do not disclose that there was a homicide in the property.  You could refrain and say that you are not obligated to disclose that information if you are asked. If however, you were asked by the seller whom you represent that there is mold in the walls that have been covered up by wallpaper, you would inform your seller that you are required, to be honest and that the seller needs to disclose this material issue. If the seller says that they do not want anyone to know, as then the buyer would not purchase the property for the price the seller wants, then it would be up to you to cancel the listing or move forward. You would have to make this perfectly clear to the seller that  if you are asked about any defects that are not visible,  you would have to disclose this material issue as it is unlawful not to disclose and make sure the seller knows they also need to disclose this issue in the SPDS (Seller Property Disclosure Statement.)

Let’s get into the Code of Ethics here for a minute.

Article 15 of the Code of Ethics states:
REALTORS® shall not knowingly or recklessly make false or misleading statements about other real estate professionals, their businesses, or their business practices. So, when working with other agents, you want to be professional and work out negotiations with a great deal of care with your client’s best interest in mind.

Article 1 states that: When representing a buyer, seller, landlord, tenant, or other clients as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other parties in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly.

So, honesty is the key here and not disclosing a material concern about the property that also may be a health hazards would not be honest dealings with the public. Which brings us to the fiduciary duty of Disclosure.


The duty of honesty and fairness does not depend on the existence of an agency relationship. It is an agent’s duty to disclose to non-principals any known material facts concerning the value of the property.

An agent is obligated to disclose to his principal all relevant and material information that the agent knows and that pertains to the scope of the agency. The duty of disclosure obligates a real estate broker representing a seller to reveal to the seller:

• All offers to purchase the seller’s property verbal or written.
• The identity of all potential purchasers.
• Any facts affecting the value of the property.
• Information concerning the ability or willingness of the buyer to complete the sale or to offer a higher price.
• Any other information that might affect the seller’s ability to obtain the highest price and best terms in the sale of the property.

Quick Quiz

Fill in the Blank:
An agent is obligated to to his principal all relevant and material information that the agent knows and that pertains to the of the agency.

A real estate broker representing a buyer is obligated to reveal to the buyer:

  • The willingness of the seller to accept a lower price.
  • Any facts relating to the urgency of the sellers need to dispose of the property.
  • The broker’s relationship to, or interest in, the seller of the property for sale.
  • Any facts affecting the value of the property.
  • The length of time the property has been on the market and any other offers or counteroffers that have been made relating to the property.
  • Any other information that would affect the buyer’s ability to obtain the property at the lowest price and on the most favorable terms.

Working with the seller and buyer on the same property is cause for a dual agency, and both parties need to understand and agree to this arrangement prior to writing a contract to purchase. There are certain duties that are then limited. Take a look at the Real Estate Disclosure and Election form again under Section III.

 15.  III. Broker Representing both Seller and Buyer (Limited Representation): A broker, either acting directly or through  one or more

16.  Licensees within the same brokerage firm can legally represent both the Seller and the Buyer in a transaction,

17.  But only with the knowledge and informed consent of both the Seller and the Buyer. In these situations, the Broker

18.  Acting through its licensee(s) represents both the Buyer and the Seller, with limitations of the duties owed to the Buyer and the Seller:

A) The broker will not, without written authorization, disclose to the other party that the Seller will accept a price or terms other than stated in the listing or that the Buyer will accept a price or terms other than offered.

B) There will be conflicts in the duties of loyalty, obedience, disclosure and confidentiality. Disclosure of confidential information may be made only with written authorization.  The agent when representing both the seller and the buyer is obligated at all times to deal honestly with all parties.

Quick Quiz

Fill in the Blank:
Any other that would affect the buyer’s ability to obtain the property at the lowest price and on the most favorable .

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