What does "Fiduciary" mean in real estate?
In real estate, a fiduciary is an agent or broker who is legally and ethically required to act in the best interests of their client. When a buyer or seller signs an agency agreement, a fiduciary relationship is created: the agent becomes the client’s representative and must prioritize the client’s needs above their own.
Core fiduciary duties
The National Association of Realtors (NAR) summarizes six primary fiduciary duties an agent owes to a client:
- Loyalty — Act always in the client’s best interest, even if doing so reduces the agent’s commission or personal gain.
- Confidentiality — Keep private information (motivations, financial limits, negotiation strategy) confidential unless the client authorizes disclosure.
- Disclosure — Inform the client of all material facts about the property or transaction that could affect decisions.
- Obedience — Follow the client’s lawful, reasonable instructions and carry out their directions in the transaction.
- Reasonable care and diligence — Use professional knowledge and skill to advise, inspect, review contracts, and protect the client from foreseeable risks.
- Accounting — Accurately handle and report all funds, documents, and property entrusted to the agent (for example, earnest money deposits).
Real-world examples of fiduciary duty
- Loyalty: An agent recommends a modest, budget-friendly home that fits the buyer’s needs even though a pricier listing would yield a larger commission.
- Confidentiality: A seller tells the agent they’re willing to accept a lower offer to move quickly; the agent does not share this with buyers.
- Disclosure: A buyer’s agent discovers past flooding on a property and informs the buyer so they can evaluate risk and insurance needs.
- Obedience: A seller asks an agent not to show the home to certain people for non-discriminatory reasons; the agent complies.
- Reasonable care and diligence: The agent schedules inspections, reviews contingencies, and explains potential liabilities before the client signs paperwork.
- Accounting: An agent deposits an earnest money check into a trust account promptly and provides a transaction ledger.
Why fiduciary duty matters
Fiduciary duty creates trust and protection in real estate deals. It reduces the risk of conflicts of interest, misrepresentation, and financial harm by legally binding agents to act for their clients’ benefit. Knowing an agent has fiduciary responsibilities empowers buyers and sellers to ask the right questions and expect ethical, professional representation.
How to use this when hiring an agent
- Ask whether the agent will represent you as a fiduciary (buyer’s agent or seller’s agent) and request the written agency agreement.
- Clarify expectations: communication, confidentiality, and how the agent will handle conflicts of interest.
- Verify experience in due diligence tasks—inspections, disclosures, contract review—to ensure reasonable care and diligence.
Bottom line
“Fiduciary” in real estate means the agent has a legal and ethical duty to put the client’s interests first. Understanding these duties—loyalty, confidentiality, disclosure, obedience, reasonable care, and accounting—helps you choose the right representation and protects you throughout the transaction.
