Ethics, Agency, and Legal/Regulatory Considerations
Fiduciary duties
An agent owes the client care, obedience (within lawful instructions), loyalty, disclosure, confidentiality, accounting, and reasonable skill. Loyalty means no self-dealing and no advancing another party's interest. Confidentiality protects the client's motivation, finances, and strategy - but it never covers material facts about the property, which must be disclosed to avoid misrepresentation. Confidential information from a former or dual client cannot be used against them.
Disclosure and representation
Agency relationships must be disclosed in the manner the jurisdiction requires, typically early and in writing. Dual agency (or a similar limited-representation construct) requires informed written consent and neutral treatment of both sides; some states prohibit it or restrict it heavily. Customers who are unrepresented are owed honesty and fair dealing, not confidentiality.
Conduct rules every candidate should recognize
- Misrepresentation: false statements of material fact. Puffery ("charming") is tolerated; "new roof" when it leaks is fraud.
- Antitrust: competitors may not agree on commissions, fees, or to divide markets. Discussing commission rates with a competing broker is a red flag regardless of intent.
- Fair housing: marketing, screening, and steering rules; describe property, not people.
- RESPA and referral fees: unearned fees and undisclosed kickbacks are prohibited.
- Recordkeeping and advertising truthfulness.
Worked example. A seller tells his listing agent the basement floods every spring and asks him not to mention it. The agent must disclose the material fact; confidentiality does not extend to known property defects. The correct answer in any scenario question is disclosure plus client counseling.
Trap: items treating "as is," buyer-beware, or client instructions as overriding the duty to disclose known material facts.