If you’re thinking of buying a house, it’s easy to assume the real estate agent or agency you’re working with has your best interests at heart. Whether you’re buying or selling, it’s hard to imagine that these entities would only think of themselves, right?
Recently, Consumer Federation of America (CFA) posed a national survey question to a group of adults who were asked whether or not they assume realty agents are required to represent the best interests of the home buyer or seller with whom they are working. Around 50 percent answered yes, and 16 percent said, “yes, almost always.” Leaving two-thirds of consumers in the survey with roughly the same impression.
A new report from CFA found that in fact, “real estate agents often are not required by law to represent the interests of buyers or sellers.” Meaning that clients of these agents can fall prey to poor transactions or self-dealing, as real estate agents are not legally obligated with a fiduciary duty to their clients.
The author of the report and immediate past executive director of CFA, Stephen Brobeck, says the vast majority of consumers don’t understand the varying types of representation by realty agents. He says the key question they need to ask before agreeing to work with any agent is: Will you be representing us exclusively throughout the transaction and have a fiduciary duty to us?
“The holy grail is to capture the entire commission,” says Brobeck. “The listing agent might say to the seller, we’ve got a hot buyer for your house.”
Common forms of representation examined in the CFA study:
- Single agent: The agent works solely for the client and has a fiduciary responsibility to the client.
- Subagent: The agent works with the buyer but has a fiduciary duty to the seller.
- Transactional agent: The agent works with both the buyer and seller to facilitate a sale but has no fiduciary responsibility to either party.
- Dual agency: An arrangement whereby “the agent somehow is expected to represent the interests of both the seller and the buyer in a home purchase.”
Breach of Fiduciary Duty Attorneys
The attorneys at Feldman & Feldman handle allegations of breach of fiduciary duty very carefully. We understand these claims often involve delicate situations, so we work efficiently to protect your interests while exploring all options for resolution. If you have been accused of breaching your fiduciary duty or if you believe your fiduciary’s actions constitute a breach, contact us today to schedule a consultation.
A fiduciary duty is the highest duty imposed by law, and while there are many types of fiduciary relationships, the definition is very broad. Generally speaking, a fiduciary duty exists between a fiduciary and a trustee. The fiduciary is expected to act in the best interest of the trustee. This relationship applies to lawyers and clients, doctors and patients, and legal guardians and their wards. However, these are all very different relationships, so a one size fits all approach to the handling of a fiduciary duty can often lead to litigation. But, the definition of fiduciary duty could see some changes in the near future when it’s applied to brokers and investors.
The Securities and Exchange Commission (SEC) has been under pressure to address whether or not a fiduciary duty exists between brokers and financial managers and their clients. In April of this year, the SEC released a proposal to “address retail investor confusion about the relationships that they have with investment professionals.” Under the proposal, a broker-dealer making recommendations to retail customers would have a duty to act in the customer’s best interests. However, the proposal carefully referred to this as a “care obligation” rather than a fiduciary duty. While the proposal took steps to more clearly define the relationship between brokers and investors, the Investor Advisory Committee (IAC) of the SEC had several strong recommendations.
Fast-forward seven months, and the IAC voted to adapt the SEC’s proposed standards to include a more fiduciary-focused set of standards. The committee voted that the proposal should explicitly state the relationship between a broker and a client is a fiduciary one. The SEC will move forward with revising its proposal, but it is not yet clear exactly how the relationship will be defined. The SEC has expressed interest in defining the relationship in such a way that it can remain flexible.
Although the broker-investor relationship may see a more specific definition in the months and years to come, it is absolutely clear brokers do owe a duty of care to investors. Brokers should operate in good faith and without self-dealing. When people trust brokers with their financial assets, they deserve to have their best interests protected.
Fiduciary Duty Attorneys
If you believe your broker or other financial advisor has breached his or her fiduciary duty, do not wait to call Feldman & Feldman today. Our fiduciary duty attorneys are experienced trial lawyers and litigators that can help you hold fiduciaries accountable for financial losses they cause and other applicable damages.
A fiduciary duty is the strictest duty of care recognized by the legal system. Because of this, it is incredibly important that fiduciaries fulfill their responsibilities correctly and faithfully. Many people would be surprised by how broadly fiduciary duty can be applied and how unintentional actions could cause a breach. Here is everything you need to know about fiduciary duty, whether you were appointed a fiduciary or principal (the party to whom the fiduciary owes a duty).
Defining Fiduciary Duty
Fiduciary duty is broadly defined as the legal duty of one with superior knowledge and/or power to act in the best interest of another party. It’s pretty easy to see how broadly this can be applied; however, there are a few parties commonly serving as fiduciaries in relationships with those they serve. These include:
- Real Estate Brokers
- Corporate Officers
One of the most common breaches of fiduciary duty has to do with conflicts of interest. You wouldn’t want your real estate broker making recommendations that also benefited him. This might make him more inclined to make recommendations that aren’t necessarily best for you, but are good for him. Any conflict of interest or self-dealing is not allowed in a fiduciary relationship.
When fiduciaries do not put their principals’ best interests first, they can be found responsible for breaching their fiduciary duties. Breaches are not always intentional. Sometimes, fiduciaries fail to do their due diligence before making a big decision. While this isn’t done maliciously, it still constitutes a breach. But, just because principals suffer damage from a fiduciary’s decision doesn’t mean a breach has occurred.
Breaches Are Complicated
Fiduciaries make many important decisions on behalf of their principals. Fiduciaries can’t always predict the outcome of a decision, but they are expected to exercise reasonable caution and to be fully informed before making any decisions. If a breach is suspected, it will require the help of an experienced breach of fiduciary duty lawyer. A lawyer will be able to investigate the circumstances surrounding the breach and determine if the fiduciary can be held responsible for any resulting damages.
Breach of Fiduciary Duty Attorneys
If you have been accused of breaching your fiduciary duty or if you believe your fiduciary’s actions constitute a breach, Feldman & Feldman can help. Contact us today to schedule an appointment with one of our dedicated breach of fiduciary duty attorneys.