What Being a Fiduciary Means in Real Estate
As she rang up my purchase, she apologized for forgetting my name so she could look up my club membership. I looked up at her and saw the tears running down her cheeks. "I'm sorry" she said. "I'm in the middle of selling my home and buying another and I've been crying all morning."
Oh dear. That is NOT what a real estate agent wants to hear, even when the person is not your client. "I'm so sorry to hear" I said as I pulled out my debit card. Terry continued on with her woes. "The buyers want all these repairs, my agent says I have to do them. And the house I'm buying, I just found out that the flipper did not get permits for all the remodeling." Oh NO! I screamed inside, this poor gal is all alone, where is her agent? Again, I said "I'm so sorry, wow, that's sad to hear as I'm in real estate and you shouldn't be handling this all by yourself." The next 15 minutes were spent with her venting on what was happening - and not happening - with her transactions. It was really hard for me to remain professional and ethical in not calling out her agent for the lack of representing her client's best interests. You see, being a fiduciary is our #1 priority in real estate.
What does that mean? Let's take a look at what Webster's Dictionary says about fiduciary: of, relating to, or involving a confidence or trust: as held or founded in trust or confidence; holding in trust; depending on public confidence for value or currency.
n real estate, agents/brokers have a fiduciary duty of utmost care, integrity, honesty and loyalty to the client. Now I get it, sellers and buyers can get upset over things that are beyond the agent's control - a buyer's response, the appraised value, the market demand. But in Terry's case - and others like hers - I know exactly what is going on. The agent is protecting her commission. She wants the seller to do all the repairs the buyers want so she can get this thing closed and get paid. A seller is not obligated to repair anything the buyer asks for. Yes, there usually are items I recommend but there is no contractual obligation on the part of the seller to do any or part of requested repairs. From what Terry shared with me, she had responded appropriately in what she was willing to do and her agent should have represented her position back to the buyer's agent. But the agent didn't. She came back and told Terry they wanted this and that also. And she dumped it all back into Terry's lap. And left. And Terry is freaking out. So tell me what part of fiduciary is this - is there care? Where is the integrity, the honesty, the loyalty to Terry?
I know the negotiation part of inspections and repairs is not a breeze. I have had sellers who have had to do some major repairs to be able to sell the home. But we discussed that upfront, they were aware of what could be asked of them and they got it. From the sellers' viewpoint, the buyer has all the power and there is a fear in saying no to a request as the buyer could cancel. It is a very understandable fear. But if all I did was say hey Mr. and Mrs. Seller, the buyers are demanding this to be done and then I left my clients to figure out how to get this done, I'm not doing my job. I'm not performing my #1 obligation to my clients.
And you know what, Terry is double whammed because this same agent is representing her as the buyer of a flipped property without permits. YIKES - where is the fiduciary duty here? Sometimes during inspections, there are findings that show up that say it's time to request some significant mitigation or be willing to cancel and walk away. Again, back to the care, integrity, honesty and loyalty to your client. No wonder real estate has such an awful reputation. And you know I am not the only one Terry is sharing this story with. Other customers of her store, her neighbors, her friends and family. are hearing it too. Being the curious type, I had to go look up who her agent was and saw she was with my former broker. Validation for my going independent.
It really is unfortunate - but it's true. Working in a 100% commissioned based industry means for many agents out there their loyalty is to their own paycheck. So what the sellers do repairs that could have been negotiated, or the price was set too low for a quick sale, or pushing a buyer into a home with possible future issues, or lying about the availability of a home because it offers only a 2% commission, or not disclosing information the listing agent shared about the home - all because the agent wants - no, needs this deal to close and get paid. I've had transactions canceled after working months on them. Disappointed? Yes. Frustrating? Of course. But it was in the best interest of my clients. And their interests are my fiduciary duty. Pay check or not.
