National Real Estate Exam (PSI)General Principles of AgencyMedium
A buyer's agent is helping a client find a home. During the search, the agent discovers a property listed by their own brokerage that would earn the agent a significantly higher commission split than other comparable listings. The agent begins steering the buyer toward this listing despite it not being the best fit for the buyer's stated needs. Which fiduciary duty is the agent violating?
- ADuty of obedience
- BDuty of accounting
- CDuty of loyalty
- DDuty of disclosure to third parties
Show answer & explanationAnswer & explanation
Correct answer: C. Duty of loyalty
The duty of loyalty requires an agent to act in the client's best interest and avoid self-dealing or conflicts of interest that benefit the agent at the client's expense. Steering a client toward a property for personal financial gain rather than the client's needs is a clear breach of loyalty.
Why the other options are wrong
- A. Obedience concerns following lawful client instructions, which is not the issue here.
- B. Accounting involves properly handling client funds, not conflicts of interest.
- D. Disclosure to third parties concerns material facts about the property, not the agent's own conflict.
Duty of Loyalty
A fiduciary duty requiring an agent to act solely in the principal's best interest and avoid self-dealing or conflicts of interest.
- Prohibits secret profits or commissions
- Requires disclosure of any conflicts of interest
- Breach can result in loss of commission and license discipline
Memory trick: Loyalty means the client's interest, not the agent's wallet, comes first.