What fiduciary responsibilities do real estate agents have for a buyer?

Question

As the title states, What fiduciary responsibilities do real estate agents have for a buyer?

As a example to stir the thought process. Real estate agents have an inherit benefit of a buyer paying a higher price for a home as they get more commission since its based on a percent of the home's final sell price. If you can prove they give you advice in offering a higher price than required to buy the home. Can they be held liable for something?

Another example, What if you want to make a lowball offer on a home. The buyers agent says "Hey to guarantee you get the home, you can offer over asking price by 40K and still get the home". You say to them, "I can offer at asking or below and still get the home. Why should I over pay?". They then proceed to say they will put in the offer but never do. Then the home sells for the same amount you proposed to them. Are they liable for not putting in the offer?

Answer 1

Since you ask specifically about fiduciary duties ...

These exist in common law and are in addition to and complement any statutory or contractual duties.

First, real estate agents do owe a fiduciary duty to their clients. The linked article breaks them into six categories, even though the duty is a wholistic one it gives a reasonable framework to think about it:

Obedience: You must obey your client’s lawful instructions.

Loyalty: You must always act in your client’s best interests, even if it means forgoing your own interests.

Disclosure: You must disclose any material facts about the transaction, including your relationship to the other party.

Confidentiality: You must keep your client’s information confidential unless you have their permission to do otherwise.

Accounting: You must keep accurate records of all money and property involved in the transaction.

Reasonable Care: You must use reasonable care and skill when handling your client’s business.

Urging a buyer to offer a higher price, even though it is good for the agent, doesn't mean it's a breach of the fiduciary duty. If the objectively assessed reason (i.e. by the judge after the event) is that the advice was commercially sound and in the best interest of the buyer, then there is no breach of duty.

Failing to follow the client's instructions to make an offer is more likely to be a breach of this duty but it still depends on the circumstances. It's always best for the client to give clear instructions, preferably in writing, or the agent may genuinely confuse an instruction as a discussion. Even where there is clear instruction the agent still has to act in the best interests of the client. For example, if while taking the offer to the seller's agent they are informed "My client (the seller) has told me to reject all offers below the asking price and to no longer deal with that prospective buyer" then it would not be in the client's interest to make the offer.

Answer 2

The duties of a buyer's agent are statutorily specified in Washington State. The most relevant provision is

(a) To be loyal to the buyer by taking no action that is adverse or detrimental to the buyer's interest in a transaction

In addition there are general broker duties that apply to buyer's and seller's agents, the most relevant of which is

(b) To deal honestly and in good faith

An agent can honestly say "I'd like to offer an extra 40K, to increase my commission". They might honestly believe that an over-asking offer is necessary given the fact of the market. But they cannot propose offering 40K more unless there is a good-faith reason to believe that it will be necessary.

There is also a general duty to present all offers

(c) To present all written offers, written notices and other written communications to and from either party in a timely manner, regardless of whether the property is subject to an existing contract for sale or the buyer is already a party to an existing contract to purchase

It does say "written", so put it in writing.

Answer 3

In Colorado, the Colorado Real Estate Commission requires the following disclosure as a matter of course from someone acting as a realtor. There are three different kinds of real estate broker relationships in Colorado, each of which comes with different duties:

DEFINITIONS OF WORKING RELATIONSHIPS:

SELLER’S AGENT:

A seller’s agent (or listing agent) works solely on behalf of the seller to promote the interests of the seller with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the seller. The seller’s agent must disclose to potential buyers all adverse material facts actually known by the seller’s agent about the property. A separate written listing agreement is required which sets forth the duties and obligations of the broker and the seller.

BUYER’S AGENT:

A buyer’s agent works solely on behalf of the buyer to promote the interests of the buyer with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the buyer. The buyer’s agent must disclose to potential sellers all adverse material facts actually known by the buyer’s agent including the buyer’s financial ability to perform the terms of the transaction and if a residential property, whether the buyer intends to occupy the property. A separate written buyer agency agreement is required which sets forth the duties and obligations of the broker and the buyer.

TRANSACTION-BROKER:

A transaction-broker assists the buyer or seller or both throughout a real estate transaction by performing terms of any written or oral agreement, fully informing the parties, presenting all offers and assisting the parties with any contracts, including the closing of the transaction without being an agent or advocate for any of the parties. A transaction-broker must use reasonable skill and care in the performance of any oral or written agreement, and must make the same disclosures as agents about all adverse material facts actually known by the transaction-broker concerning a property or a buyer’s financial ability to perform the terms of a transaction and if a residential property, whether the buyer intends to occupy the property. No written agreement is required.

CUSTOMER:

A customer is a party to a real estate transaction with whom the broker has no brokerage relationship because such party has not engaged or employed the broker, either as the party’s agent or as the party’s transaction-broker.