This article is an overview of the legal duties of buyer agency in California. For a softer look at how we translate our legal duties into your actual experience, take a moment to read “Our Grandmother’s Jade.”
Video explaining Real Estate Agency Relationships:
In the state of California, real estate agency is governed by California Civil Code Section 2079.16. It defines buyer agency as:
A selling agent can, with a Buyer’s consent, agree to act as agent for the Buyer only. In these situations, the agent is not the Seller’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Seller. An agent acting only for a Buyer has the following affirmative obligations:
To the Buyer: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Buyer.
To the Buyer and the Seller:
(a) Diligent exercise of reasonable skill and care in performance of the agent’s duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties.
An agent is not obligated to reveal to either party any confidential information obtained from the other party that does not involve the affirmative duties set forth above.
This definition usually trips people up because the first three words are “A selling agent” which immediately makes people think there is a relationship to the seller. Those of you that graduated from Agency 101 will remember that selling agent refers to the agent that brings the offer, which is the buyer’s agent.
The civil code clearly spells out something that often confuses people about buyer agency, which is this: Even if compensation comes from the seller, the buyer’s agent has the fiduciary duty to the buyer. Not to the seller.
What is “fiduciary duty?” The fine folks at uslegal.com have a great definition of fiduciary duty:
A fiduciary duty is an obligation to act in the best interest of another party. For instance, a corporation’s board member has a fiduciary duty to the shareholders, a trustee has a fiduciary duty to the trust’s beneficiaries, and an attorney has a fiduciary duty to a client.
A fiduciary obligation exists whenever the relationship with the client involves a special trust, confidence, and reliance on the fiduciary to exercise his discretion or expertise in acting for the client. The fiduciary must knowingly accept that trust and confidence to exercise his expertise and discretion to act on the client’s behalf.
When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter. The client is entitled to the best efforts of the fiduciary on his behalf and the fiduciary must exercise all of the skill, care and diligence at his disposal when acting on behalf of the client. A person acting in a fiduciary capacity is held to a high standard of honesty and full disclosure in regard to the client and must not obtain a personal benefit at the expense of the client.
So the highest duty in the transaction where I am bound solely by buyer agency – the duty to exercise my discretion and expertise on behalf of a client who has placed their special trust, confidence, and reliance on me – is only to the buyer in buyer agency.
That being said, the law does not completely relieve me of any obligations to the seller. I am still bound to:
- be honest
- deal fairly and in good faith
- exercise reasonable skill and care, and
- disclose all material facts about the property
to both the buyer and seller.
So that’s a summary of Buyer Agency. Helpful, or too much legal gibberish?
Remember: Agency is a legal topic. I am not an attorney, nor do I have any plans to become one. If you are seeking legal advice about agency, consult a qualified attorney. If you do not understand the agency relationships in your specific situation, do not rely upon this article to clear things up. Consult an attorney! Whatever you do, don’t just take the blog posts you stumble across from an internet search as the gospel truth.