New York Real Estate Salesperson ExaminationLaws of AgencyHard
A seller lists their property with a broker. The listing agreement states that the broker will receive a commission of 5% of the sale price. During negotiations, the buyer's agent offers a price that the seller finds acceptable. However, the seller's agent (the listing broker) advises the seller to reject the offer and wait for a higher one, even though the current offer is fair and meets the seller's needs. Which fiduciary duty is the seller's agent potentially violating?
- ADuty of care
- BDuty of loyalty
- CDuty of accounting
- DDuty of confidentiality
Show answer & explanationAnswer & explanation
Correct answer: B. Duty of loyalty
The duty of loyalty requires an agent to act solely in the best interests of their client. By advising the seller to reject a fair offer that meets their needs, potentially for the agent's own benefit (higher commission on a higher price, or simply a belief they can get more), the agent may be placing their interests or judgment above the client's expressed wishes.
Why the other options are wrong
- A. Duty of care involves using skill and diligence, which might be related, but loyalty is the more direct breach when the agent's advice seems to conflict with the client's best interest for a potentially self-serving reason.
- C. Duty of accounting involves handling funds and property correctly, which is not the issue here.
- D. Duty of confidentiality protects client information, which is not being breached in this scenario.
Duty of Loyalty
A fiduciary duty requiring an agent to act solely in the best interests of their principal, avoiding any conflicts of interest.
- Agent must prioritize client's interests.
- Must avoid self-dealing.
- Requires full disclosure of conflicts.
Memory trick: OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care.