Agency and Fiduciary Duties
This domain tests how agency is created, who the agent represents, and the fiduciary and statutory duties owed. Questions often turn on disclosure, confidentiality, and dual agency.
Creation and representation
Agency can be express (listing or buyer-broker agreement), implied by conduct, ratified by the principal, or created by estoppel. A client receives fiduciary duties; a customer receives honesty and fairness but not advocacy. Subagency is an agent of the seller's agent; designated agency represents different parties within one brokerage; dual agency represents both and requires informed consent. A transaction broker assists without full advocacy in states that authorize it.
Fiduciary duties
The core duties are loyalty, obedience to lawful instructions, disclosure of material facts, confidentiality, accounting, and reasonable care. Confidentiality protects the client's negotiating position but never permits fraud or concealment of known material defects. The agent must present all offers promptly, avoid commingling client funds, and disclose compensation and agency relationships as required.
Worked example
A buyer's agent learns the buyer will pay $20,000 above list. The seller's agent asks, 'Can your buyer go higher?' The buyer's agent must not reveal the buyer's confidential ceiling or negotiating strategy. The agent may present the offer and negotiate, but loyalty and confidentiality bar disclosing that fact to the seller's side without authorization. If the same brokerage represents both parties, it must disclose dual agency and obtain consent; the brokerage cannot secretly favor one side.
Traps
Confidentiality continues after the transaction. 'Obedience' does not require following an illegal instruction. A customer is not a client. Do not assume a commission is earned only at closing; it depends on the agreement. Do not disclose one client's confidential facts to another client in a dual-agency setting.