New York Real Estate Salesperson ExaminationLaws of AgencyHard
A real estate broker is representing a buyer. The buyer informs the broker that they are willing to pay up to $500,000 for a specific property, but they want to start their offer at $450,000. The broker then communicates this full financial capacity ($500,000) to the seller's agent during negotiations. Which fiduciary duty has the buyer's broker breached?
- ADuty of accounting
- BDuty of disclosure
- CDuty of loyalty
- DDuty of obedience
Show answer & explanationAnswer & explanation
Correct answer: C. Duty of loyalty
The duty of loyalty requires the agent to act solely in the best interests of their principal. By disclosing the buyer's maximum willingness to pay, the broker undermined the buyer's negotiating position, acting against the buyer's best interest. While it also touches on confidentiality, loyalty is the broader duty encompassing the agent's obligation to protect the client's position.
Why the other options are wrong
- A. Duty of accounting relates to handling funds, not confidential information.
- B. Duty of disclosure typically refers to disclosing material facts about the property or transaction to the client, not disclosing client's confidential information to the opposing party.
- D. Duty of obedience would be breached if the buyer explicitly said 'do not tell them my maximum' and the broker did anyway. Here, the issue is more broadly about acting against the client's interest.
Breach of Loyalty (Buyer's Agent)
Occurs when a buyer's agent acts against the buyer's best interests, often by revealing confidential information that weakens the buyer's negotiating position.
- Agent prioritizes other interests over client's.
- Can involve disclosing confidential client info.
- Directly harms client's position.
Memory trick: OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care.