The Legal Benefits of Using a Licensed Real Estate Agent

By Rudy Yuly

Are there legal benefits to using a licensed real estate agent?

The short answer is yes. Licensed real estate agents have legal obligations - formally called "fiduciary duties" - to their clients that are commonly referred to by the acronym OLDCAR.

O = Obedience

If you give an agent who is representing you an instruction with any financial implications (more about what constitutes "representation" below), they are obligated to follow it, even if they strongly disagree - as long as it's legal and doesn't contradict a contractual agreement.

L = Loyalty

Your agent is obliged to put your interests above those of anyone else involved in the deal - including themselves.

D = Disclosure

If your agent knows any fact that's "material" to the sale, they are obligated to share that fact with you. And while they're not obligated, they're also motivated to find out as many of those material facts as possible.

C = Confidentiality

Your agent must protect your confidentiality. That means they can't share any information about you or your situation (without your permission) with any other party to the deal.

A = Accounting

Your agent is responsible for keeping track of funds in play in the deal.

R = Reasonable care

This one is a bit sticky. An agent is obligated to use "reasonable" care and diligence while handling your affairs. Though exactly what reasonable care means in any specific transaction often ends up being decided by a judge in court.

Who is (and isn't ) your agent

This is an important distinction. The fiduciary duties above only apply to a real estate agent who's working for you. That means you either have a verbal or written agreement with them.

Often, you'll run into a situation where you end up interacting, perhaps a lot, with an agent who is part of the deal, but who isn't formally representing you. They'll most likely be nice, professional, and helpful.

But if they're the seller’s agent, they're obligated to the seller, not you, and the legal obligations they have to the other party don't apply to their interactions with you.

Whose side are you on?

The agent’s legal obligations also depend on whether you're a buyer or a seller. You should know that these obligations are in direct competition.

For instance, if you're a buyer and you have an agent representing you, their duty to you is to keep quiet regarding any information about you that the seller might not like (confidentiality).

The seller's agent, on the other hand, has a duty to their client to find out everything about you they can (disclosure).

For another example, if you're dealing with an agent who isn’t officially representing you, they're not bound by loyalty. In other words, they don't have to do anything you tell them or ask them to do.

Holding agents to their legal obligations

Of course, in the real world, there are sometimes issues with how these legal obligations play out.

Every agent has a real interest in maintaining good relationships with other agents. Sometimes, unfortunately, agents can get too friendly. If things get too cozy, they might casually or carelessly disclose information to one another that they shouldn’t.

Extreme cases of over-sharing might even involve collusion. That's when two agents get together on the side and work to structure the deal so it benefits both of them (or someone on the outside with a hidden future interest in the property) - above the interests of either of their clients.

If you think something's off with the information and service you're getting from your agent, or if you feel things are too cozy between your own agent and the other party's agent, you can complain to the company where either of them works, or go up the ladder and make your complaint to the local affiliate of their professional organization.

Your first and best option is to get a different agent. You can usually do this by informing your agent in writing that you no longer wish to be represented by them (and if you feel their behavior has been unethical, you can copy their employer or their professional association).

Be aware, though, that if you've signed an agreement of representation with the agent, you may still have liabilities, including a liability to pay them a commission, if the original agreement had a procuring clause.

So while it's important to know where you stand and your agent's legal obligations, there are genuine legal benefits to working with a licensed real estate agent.

Furthermore, in a transaction where one party has an agent and the other doesn't, the party with the agent has a bit of an edge - part of which is that many people don't understand the agent is only working for one of the parties, not for the benefit of both.

Rudy Yuly is a Seattle- and San Francisco-based journalist, blogger, and novelist. 

Related:

• Should You Use the Listing Agent When Purchasing a Home?
• Why Home Buyers and Agents Need to Have Each Other’s Backs
• 5 Ways Home Buyers Make Their Agent’s Job Harder

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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