Reasonable Care/Accounting/Confidentiality – Agency Law & Ethics

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Reasonable Care

What would you consider reasonable care? When pursuing the principal’s affairs, the licensee is obligated to use reasonable care. The standard of care that the agent must hold high to is a standard of care of a competent professional.  In order to become a real estate agent, students take courses in real estate and then must pass a national and state test. They also may have to pass the school test in order to even take the national and state tests.

These courses do not give you even a taste of what the reality of real estate business is like on a day to day basis. Working with buyers and sellers takes a special skill and expertise in many areas. Your obligation is to affirmatively discover facts relating to the principal’s affairs and property conditions. It is up to you, the agent, to point them in the right direction. To not sweep things under the rug so to speak so you can get paid. Your first and only concern should be that of your client.

To give quality information and where to find that information. The Buyer Advisory has come a long way over the years and has many websites and many items that would be material concerns for a buyer and a great tool to find information on a full array of real estate related issues. As the agent, you are to know about the demographics and surrounding attributes of property. If you are not knowledgeable about a specific area that your principal is looking in, it may benefit your principal to refer them to someone more knowledgeable in that location.

The agent must also obtain information that is material to the client in order for the client to make an informed and educated decision.  You should also recommend that the client seeks appropriate counsel from insurance, legal, tax, and accounting professionals and discuss topics such as the risks of pre-possession and post-possession.

With regards to reasonable care, your license does not give you the authority to be knowledgeable  when it comes to legal issues, tax consequences or even inspection issues. Those are jobs for the people with those kinds of licenses. On most of the forms, there is a paragraph that states this quite clearly and you should read this to your client and have them initial it as understanding it.

Quick Quiz

Fill in the Blank:
The of care that the agent must hold high to is a standard of care of a competent .


You are obligated as the client’s or principal’s agent to account for all money and/or property entrusted to you by the principal.  You are to safeguard deeds, money and any other document given to you that relates to your client’s transaction. What kinds of money would you be obligated to safeguard? Earnest money deposits that are to be put into an escrow account upon contract acceptance would be an example. Listing agents must keep track of all showings so that they have a record of who has entered the property. Our lock boxes will give you a report of that if you attach them to your listing. Agents must also ensure that a listed house is secure. Make sure your seller knows to put all valuables in a safe place and any other items that are special to them should be put away in a safe place. Not all who enter the home have good character or morals.

It is very important when taking an earnest money check from your client that you keep it in a safe place until deposited in an escrow account per the accepted contract. Let’s just say that the client gave you a check for the earnest money deposit for an offer you have submitted to the listing agent. On the way between work and home, you have misplaced this check. And worse than that it was blank in the payee section because the title was TBD or to be determined. Now you must call the client and tell them to cancel that blank check for $5000.00. How do you think your clients would think of you in being protected and accountable with their affairs.  You have heard this before but here it is again, as the agent, you must act in the best interest of your principal at all times.


Every agent is obligated to safeguard the principal’s money and personal papers and documents but also to safeguard the principal’s confidence.  Even past the agency representation expiration date or the successful close of a transaction, you as the agent must keep confidences confidential. An example of this would be a broker representing the seller is prohibited from disclosing to the buyer what the seller will come down to in price and also if representing the buyer, the agent would be prohibited from disclosing what the buyer would come up to in price.  Information regarding personal items such as going through a divorce or hardship that may set the seller in a position to take any offer.

Confidentiality absolutely does not include any obligation to withhold material facts concerning the condition of the property. Misrepresentation of property condition would impose a liability on both the broker and the seller.

Fiduciary duties are the highest known to the law. An example of fiduciaries are trustees, executors or guardians and real estate brokers and agents.

Quick Quiz

Fill in the Blank:
Every agent is to safeguard the principal’s money and personal papers and documents but also to safeguard the principals .

Code of Ethics 

Standard of Practice 1-9

The obligation of Realtor’s® to preserve confidential information (as defined by state law) provided by their clients in the course of any agency relationship or non-agency relationship recognized by law continues after termination of agency relationships or any non-agency relationships recognized by law. Realtor’s® shall not knowingly, during or following the termination of professional relationships with their clients:
1) Reveal confidential information of clients; or
2) Use confidential information of clients to the disadvantage of clients; or
3) Use confidential information of clients for the Realtor’s ® advantage
or the advantage of third parties unless:
a) Clients consent to full disclosure; or
b) Realtor’s® are required by court order; or
c) It is the intention of a client to commit a crime and the information
is necessary to prevent the crime; or
d) It is necessary to defend a Realtor or the Realtor’s ® employees or
associates against an accusation of wrongful conduct. Information concerning latent material defects is not considered confidential information under this Code of Ethics.                                    (Adopted 1/93, Amended 1/01)

Quick Quiz

Fill in the Blank:
The obligation of Realtor’s ® to confidential information (as defined by state law) provided by their clients in the course of any agency relationship or non-agency relationship recognized by law continues after of agency relationships or any non-agency relationships by law.

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