Agency, Fiduciary Duties, and Consumer Disclosure
Forming the relationship
In New Jersey, an agency relationship is created when a broker accepts the authority to act for a principal - typically through a written listing agreement or buyer agency agreement. At the first substantive contact in a residential sale or rental, the licensee must deliver the Consumer Information Statement (CIS), which explains seller agency, buyer agency, dual agency, and the possibility of dealing with a licensee who represents no one. The CIS is a disclosure, not a contract, but failing to deliver it is a common disciplinary issue.
Fiduciary duties
Memorize OLD CAR (or COLDAC): Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable Care. Loyalty forbids self-dealing and secret profits. Disclosure requires prompt reporting of material facts to the principal - and New Jersey also requires honesty and fair dealing toward the other party, so material physical defects known to the licensee must be disclosed even in an arm's-length deal. Confidentiality outlives the transaction. Accounting means money and documents are handled promptly and accurately.
Dual and designated agency
Dual agency is lawful in New Jersey only with the informed written consent of both parties, and the dual agent must remain neutral - no advocacy on price. Designated agency permits different licensees in the same firm to represent each side while the firm, not the individual agents, becomes the dual agent.
Disclosure traps
Sellers of most one-to-four unit residential property must complete the Seller's Property Condition Disclosure Statement before the buyer signs; certain transfers (newly constructed never-occupied homes, some estate and foreclosure transfers) are exempt. Federal lead-based paint disclosure is required for pre-1978 housing. Licensees are not property inspectors and should not warrant condition.
Worked example
A buyer tells the listing agent, "We'd go to $500,000." The listing agent represents the seller. That information is material and must be relayed to the seller - the listing agent cannot keep it to encourage a higher written offer, and cannot advise the buyer.