Bond…James Bond – secret agent vs. fiduciary agency
Being a secret agent works well for James Bond: infiltrating the enemy, securing the microchip and getting the woman are all part of the mystique.
The structure of the agent-client relationship or broker-agent relationship should not be a secret. The California Bureau of Real Estate (CalBRE) is always looking out for the consumer, protecting their interests by upholding and creating laws, searching-out the unethical broker and reprimanding appropriately.
The agent has a fiduciary relationship with their client, which is often misunderstood by those in the business as well as the consumer. The relationship is governed by CalBRE and the Civil Code and Business & Professional Code.
Real Estate Agency
The agency disclosure form that all buyers, sellers, landlords and tenants must sign explains the duties created by an agency relationship. But, do not confuse this with an “agent” and “broker” as the agency disclosure is a relationship whereas an agent or broker is a licensee who can represent a client in a real estate transaction.
When an agency relationship is created the agent has a fiduciary duty to uphold the interests of his or her client. Fiduciary trust is a big deal–the law interprets this trust seriously and demands a higher level of care from the trusted party.
The agency disclosure lists the duties created which is a “duty of utmost care, honesty and loyalty in dealings with the buyer and seller.”
The disclosure further states the agent must “exercise reasonable skill and care in performance of his or her duties, be honest and fair acting in good faith and disclose all known facts, which materially affect the value or desirability of the property.”
So, what is the difference between an agent and a broker?
Generally speaking someone selling or leasing real estate or procuring real estate loans is either an agent or a broker. There are instances where an employee could be representing a developer or owner/investor in their portfolio of real estate dealings, but this is an exception.
An agent must pass three college-level real estate courses and the real estate agent exam. After a background check the license is issued, which is valid for four years. In order to renew the agent must have continuing education credits.
The agent cannot perform real estate transactions on their own and must place their license with a broker. In essence the agent is representing the broker in all dealings. The broker is required to review all contracts and actively supervise all aspects of the agent. The broker’s license is at risk for any misdealings of the agent.
To obtain a broker’s license an agent must complete eight college-level real estate courses, have two years experience as an agent in the last five years and pass the exam. There are other methods of satisfying the requirements.
A broker can act under his or her own license to perform real estate transactions or can be an officer of a corporation acting on behalf of the corporation. A broker can also be affiliated with another broker as a broker-associate, but does not have the requirements placed on her as an agent would.
What is a REALTOR®?
A REALTOR® is a licensed agent or broker who is a member of the National Association of REALTOR®, California Association of REALTOR® and the local REALTOR® board office. There are many advantages to being a member. Members must also abide by a strict code-of-ethics.
The law can be complicated as well as the different structures allowed in the real estate brokerage business. Licensed and unlicensed assistants have their own set of requirements as well as a new trend we are seeing with agents setting up teams.
The take-away to remember is the fiduciary duty the agent has with their client. It should be no secret the level of trust and confidence created by the agent and their client.
Burt M. Polson, CCIM, is a local real estate broker specializing in commercial, luxury estates and wineries. Reach him at 707-254-8000, [email protected]. Sign up for his email newsletter at BurtPolson.com.