3-1

3. Client and Customer3. Client and CustomerRelationshipsRelationshipsIn This Chapter

Duties to clients and customers

Exercising reasonable care and diligence

Agency conflicts, dual and disclosed dual agency

Implied and imputed knowledge

Conflicts of interest

Penalties for breach of duties

Establishing scope of services

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3-2

FiduciaryFiduciary

The relationship existing when one person

justifiably reposes confidence, faith, and

reliance in another whose aid, advice, or

protection is sought. Duties to both a client and a customer Highest level of fiduciary duty is to the

buyer Statutorily defined or common law

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3-3

Skill Builder TipSkill Builder Tip

Common law is made by judicial decisions– assumes all licensees affiliated with a

brokerage, including the managing broker, represent all of the broker’s clients in an agency relationship

Statutory law is created by legislators– specifically defines the duties of the

agent.

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3-4

““Old Car”Old Car”

O = ObedienceL = LoyaltyD = Disclosure

C = ConfidentiallyA = AccountingR = Reasonable care and diligence

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3-5

Duties to a ClientDuties to a Client

Obedience Undivided loyalty Full disclosure Confidentiality Accounting Reasonable care and diligence

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3-6

Responsibilities to a CustomerResponsibilities to a Customer

HonestyAccounting Reasonable skillDisclosure – agency and material

fact

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3-7

Reasonable Care to Protect Reasonable Care to Protect the Buyerthe Buyer Property disclosure Recommend inspections Approved protective clauses CMA Home warranty Other professionals Share all information about the property Stay informed and inform about local issues Notify of potentially negative influences

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3-8

ControversyControversy

Express agreement? Disclosures? Consent? Control of actions? Who benefited? Who relied on licensee? Perception of representation?

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3-9

Imputed (Assumed) Imputed (Assumed) KnowledgeKnowledge

State specific

If one knows, everyone knows

Applies within an entire firm

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3-10

Imputed (Assumed) NoticeImputed (Assumed) Notice

State specific

Informing the agent is

assumed (imputed) to be

informing the client

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3-11

Vicarious LiabilityVicarious Liability

VERY state specific – does this apply in

your state?

Client is responsible for agent’s actions,

even if unaware

Based on the duty of obedience and concept

that principals should not benefit from

fraudulent actions by the agent

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3-12

Single AgencySingle Agency

Does not usually present conflicts of interest

Events can create conflictsTwo buyer-clients pursuing the

same property

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3-13

Disclosed Dual AgencyDisclosed Dual Agency

Cannot fulfill all fiduciary duties to both

Lawful after disclosure and informed consent

Cannot have undivided loyalty to opposing parties

Confidentiality vs. full disclosure

Both clients may agree to modify the brokerage

company's fiduciary duties to eliminate the duties of

undivided loyalty and full disclosure

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3-14

Skill Builder Tip: Conflicts Skill Builder Tip: Conflicts

Report conflict to broker Decide if the company's attorney

should be consulted Send a letter to both clients and suggest a

resolution to the conflict Give one or both of the parties the

opportunity to terminate the agency Add conflict to the brokerage company's

policy

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3-15

Limiting ScopeLimiting Scope

Define the limits of the services that

will be performed on behalf of the

client?

Will the property search be limited to

properties listed on the MLS?

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3-16

PenaltiesPenalties

Forfeiture of commissionActual and punitive damages (not covered in E & O insurance)

Other damagesPenalties for violation of NAR’s Code

of EthicsLoss of license in most states

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3-17

Building BlocksBuilding Blocks

How might you explain to a buyer handling of confidential information before an agreement is signed? After an agreement is signed?

How would you explain conflicts of interest that might arise and how they will be handled?

What fiduciary duties can you perform for a buyer-client? What is this to the client’s advantage?

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