Agency Relationships and Fiduciary Duties
The core of agency
Agency is a relationship in which one person (the agent) acts for another (the principal) with the principal's authority. Licensees create agency expressly (a written listing or buyer-broker agreement) and sometimes by implication, ratification, or estoppel. The client is the principal; everyone else is a customer, owed honesty, accuracy, and disclosure of material facts but not full fiduciary loyalty.
Memorize the fiduciary duties with OLD CAR: Obedience (to lawful instructions only), Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care and skill. Alongside these sit the universal duties of care, honesty, and fair dealing.
Traps
- Confidentiality is the duty that survives termination. Price motivation, financial condition, and the seller's bottom line stay confidential.
- Loyalty cannot be used to hide material facts from a non-client; the duty of disclosure to customers still applies.
- Obedience never covers an unlawful instruction, such as concealing a known defect or discriminating.
- A dual agent may not advocate for one side; the agent becomes a facilitator, and only with written consent.
- A commission is earned by procuring cause under the employment agreement, not by attending the closing.
Rule of thumb
Ask: who am I representing, and does this person need it in writing? If an unrepresented buyer asks for pricing advice, you are answering as a licensee, not as that buyer's agent.
Worked example. A seller tells her agent, I would take $20,000 under list. After closing, a buyer's agent asks the listing agent what the seller's real bottom line was. Do not disclose it, because the duty of confidentiality outlasts the transaction, and the seller's motivation was never a material fact about the property.