Fiduciary vs Functionary

Responsibility in Real Estate Transactions – The fiduciary role vs the functionary role

The Real Estate Professional does not have a role solely as a provider of information but FAR more importantly a role of analyzing and interpreting that information to the benefit of a client and to protect his or her interests in a real estate transaction.

The Real Estate Professional counsels the client in such a way that it best benefits the client, anticipates needs before they arise, uses expert judgment and intuition, is centrally involved in the decision making, and takes maximum legal responsibility on behalf of the client.

The Real Estate Professional is paid to be a Professional.

If you are considering selling your home on your own, there is no doubt it can be done. Please consider the risks and consequences. I can provide you with information on how to sell or buy your home….I cannot take legal responsibility without fully representing you. You take that risk upon yourself when you sell your home unrepresented.The internet can provide you with information on how to sell or buy your home….The Internet cannot represent you. You take the risks and consequences yourself.

What is a Fiduciary Relationship

A fiduciary relationship exists where there is a special confidence placed in one who, in equity and good conscience is bound to act in good faith and with due regard to the interests of the principal.

As a fiduciary, a real estate agent is under an obligation to give diligent and faithful service to the principal. The principal and broker are engaged to deal fairly with one another. In fact, implied in every contract between broker and client is a covenant of good faith and fair dealing. This covenant includes the duty of the broker/agent to do everything the contract presupposes will be done to accomplish its purpose.

An agent owes a principal a definite loyalty, creating a fiduciary relationship that the law compares to that of a trustee and beneficiary under a trust.

You might say, how does this affect me This is the defining relationship between you, as either the buyer or the seller, and the agent with whom you have dealings.

Ask yourself these questions Is my agent’s primary function and value in finding me a house to buy Is my agent’s primary function and value in running an ad in the local paper to get my home sold OR…..Is there something more to it

Perhaps we should look at the different roles a fiduciary (the Real Estate Professional) and a functionary (an assistant to the Professional) play.

An assistant would have the following kinds of duties:

Place ads in advertising media (The Real Estate Professional has made decisions deciding where it is best to advertise, not just advertise in the local paper) The assistant does the task and assumes a low level of responsibility, the professional a high level of responsibility in decision making.
Deliver papers to a client and ask the client to sign where yellow marks have been placed. (The Real Estate Professional knows why and when and what has to be signed because if its not, there are legal consequences) The assistant assumes a low level of responsibility, the professional a high level of responsibility and maximum legal responsibility.
The agent asks the assistant to make sure that ….the new listing is in the MLS on time according to the rules. (The Real Estate Professional has learned what the new rules are) The assistance follows the rules, responds to needs and processes data, the professional assumes a high level of responsibility if the rules are not followed.

In each case the assistant is not involved in decision making (as opposed to the agent); has a low level relationship with the client (as opposed to the agent); is easily replaceable skill wise (as opposed to the agent); does tasks and delivers information (as opposed to the agent); and has minimum legal responsibility (as opposed to the agent). The assistant is minimally paid (as opposed to the agent). The assistant’s job is purely functionary.

Given all the information available on the Internet today…are the following tasks functionary or fiduciary activities

Search to find homes for sale on the Internet
Search for a lender on the Internet
Place your home on the Internet on a web page
Buy a book on the Internet
Look up the Blue Book value of a car on the Internet

All these activities have one thing in common. They are all functionary activities. We all carry out functionary activities everyday in our everyday lives. Do any of these activities require special training Experience Do any one of these activities require special counsel Do any one of these activities require knowledge and expertise Does carrying out any of these activities mean that you take on serious legal or financial consequences, or otherwise assume great responsibility on behalf of someone else

What about these activities

Receiving medical advice on a serious medical problem where symptoms mimic many different diseases.
Getting legal advice on a traffic hit and run incident you were involved in.
Getting advice on how to best deal with mold that you have discovered in your home and your home is about to close escrow.

Now we are talking about fiduciary responsibility. Assuming high risk and maximum legal responsibility.

Buying a book, and receiving a medical opinion that you rely on based on looking up some facts over the internet are two very different things. One is a commodity that can be easily bought and sold without serious consequences, the other requires knowledge and experience to provide the service in a responsible manner.
Looking up on the Internet what the Law cites on a subject, and knowing what to do and how to handle different situations within the law are two very different things. One aspect cites a series of facts, the other knows how to interpret the facts in your best interests.
Looking up symptoms of different illnesses on the Internet, and knowing what illnesses might have the same symptoms, are two very different things. One cites a series of facts, the other makes decisions based on more than just symptoms.
Looking up houses for sale on the Internet, and knowing what serious implications there are in making an offer, are two very different things. One simply involves compiling a list of homes to look at, the other makes decisions based on what has come before, anticipates problems and prevents them from occurring.
Whereas you might look up the local traffic laws about citations and deal with that yourself, you certainly would not represent yourself in a serious traffic accident case in a court of law. The attorney will seat himself between you and the other party and and act in your best interests to interpret the law as it benefits you to not go to jail. He is acting as a fiduciary.
Whereas you might look for a good cold medicine on the shelf, you would not look to treat yourself for something far more serious. The doctor seats himself between you and your illness, decides what the alternatives might be, and acts in your best interests to interpret the symptoms as it benefits you to get well. He is acting as a fiduciary.
Whereas you might look up what homes are for sale in a town you are relocating to, you would not walk up to the front door of the house and offer whatever the seller is asking without knowing anything of the area. Similarly, what risks are YOU the seller taking when you allow prospects in your front door without having pre-qualified the third party at all The real estate professional seats herself between you and the other party and acts in your best interests to interpret what actions to take when problems occur or how to avoid the problems in the first place. She is acting as a fiduciary.

In each of these cases, the fiduciary is placing herself in a place of high risk and high responsibility on behalf of her client.

The Real Estate Professional places himself or herself in a place of high responsibility when he or she acts as a fiduciary. The Real Estate Professional does not have a role solely as a provider of information but rather interpreting that information. The Real Estate Professional counsels the client in such a way that it best benefits the client, anticipates needs before they arise, uses expert judgment and intuition, is centrally involved in the decision making, and takes maximum legal responsibility on behalf of the client.

If you are considering selling your home on your own, there is no doubt it can be done. Please consider the risks and consequences. I can provide you with information on how to sell or buy your home….I cannot take legal responsibility without fully representing you. You take that risk upon yourself when you sell your home unrepresented. The internet can provide you with information on how to sell or buy your home….The Internet cannot represent you. You take the risks and consequences yourself.

Please call me if you have any questions 661.645.5556 or MailTo:Pia@PiaSoper.com