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How Do Real Estate Agents Breach a Contract?

Jan 9, 2022 | Real Property

When a real estate agent agrees to help someone in the sale or purchase of real estate, they typically enter into a listing agreement or purchase agreement. This contract creates an agency relationship that legally subjects real estate agents to “fiduciary duties.” Fiduciary duties are a set of legal obligations that require them to act in the best interest of their clients. These specific duties include:

  • Loyalty: requires agents to act only in their client’s best interests, and nobody else’s
  • Reasonable Care: requires agents to use reasonable care and diligence when assisting their clients
  • Confidentiality: requires agents to keep information confidential that would hurt the bargaining position of their client (given withholding said the info would not be a contract breach)
  • Disclosure: requires agents on both sides to disclose certain information that would be helpful to their party
  • Obedience: requires agents to obey their client’s requests and fulfill them in a timely manner (this excludes requests to illegal acts or those out of their scope)
  • Accounting: requires agents to account for all money or assets entrusted to them by the client

Breach of Loyalty

Loyalty refers to the duty of the real estate agent to act only in the client’s best interests when assisting them in their affairs. This means that doing something during the home buying/selling process that is meant to serve the agent’s or a 3rd party’s interests could constitute malpractice, even if it was not necessarily detrimental to the client.

Breach of Reasonable Care

Real estate agents and brokers are expected to use a certain standard of care when handling their client’s real estate transactions. The standard of care for agents is that of a competent real estate professional, one who has significantly more knowledge of real estate than the average person. Failure to act within the required standard of care would be a breach of contract.

Breach of Confidentiality

It is required that agents do not disclose information that would hurt their clients’ chances of buying or selling a home for the best possible price. However, they are not required to remain confidential withholding the information would be a contract breach act itself.

Disclosure

While certain information must be kept confidential by real estate agents, they also have the duty to disclose certain information when they are both buying and selling a property.

A realtor assisting someone with buying a property must disclose information such as:

  • The lowest possible price that they know the seller will accept
  • Any issues or defects with the property that they know of
  • Other offers that have been made on the property

A realtor assisting someone in selling a property must disclose information such as:

  • All offers made on their property and the identity of the people make them
  • Anything that may affect the property value
  • A buyer’s intention to “flip” their property upon sale (buy and sell shortly after for profit)

Obedience

Obedience simply means that the agent must obey the commands of their clients unless those requests are outlawed by either their contract or the law. The client has the ultimate say in whether they should take an offer or wait for a better one, for instance. The client cannot, however, tell them to hide the fact that the air conditioning unit must be replaced.

Accounting

Accounting refers to the agent’s duty to safeguard and keep track of all money and documents entrusted to them. This makes it their responsibility to make sure they correctly bill the client and do not release private or sensitive information, especially if it would hurt their bargaining power.

Glendale Real Estate Attorney

If you or a loved one believes your agent and/ or broker has breached their contract with you, we invite you to contact our real estate attorney today at 310-933-5171.

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