We’ve written previously [Who Does a Real Estate Agent Work For?] that real estate agents work on behalf of the homeowner. To expand on that, we’re going to look at the fiduciary duty a real estate has to homeowners.
Broadly speaking, real estate agents must adhere to five guiding principles — or fiduciary duties.
Five fiduciary duties of real estate
Disclosure: A real estate agent must disclose material facts to homeowners and buyers. Material facts are those that, if known by the buyer or seller, might have caused them to change their purchase or sale actions.
Loyalty: Real estate agents must be loyal to their client — the homeowner or party who appoints them — and put their client’s best interests ahead of anyone else’s, even their own.
Obedience: Agents must obey your wishes and instructions, providing those instructions are legal, of course.
Confidentiality: Real estate agents must not disclose any confidential information they discover in their capacity as the homeowner’s agent, such as the owners financial, business or personal affairs and motivations.
Accounting: A real estate agent must account for all legal documents and monies pertaining to the real estate transaction.
Real estate agents and deposits
It’s handy for buyers in New South Wales to have some spare cash — you’ll need it to make an offer on a property you like or pay an initial deposit as an expression of interest.
This won’t mean the property is yours or that it gets taken off the market. It merely proves to the vendor that your offer is serious.
In fact, the agent can take as many preliminary deposits as they like for the one property. However, when you pay a deposit, the agent must provide you with a receipt and tell you in writing that:
- They have no obligation to sell the property to you
- You have no obligation to buy the property; and
- They’ll refund your deposit if you don’t end up entering into a contract to buy the property.
The agent must also let you know if someone else makes an offer on the same property.
If your offer is accepted, be ready to sign the sale contract and proceed with the exchange process. However, before you sign the contract, the vendor is free to negotiate with other potential purchasers, even if they’ve verbally accepted your offer.
If the vendor accepts another offer and exchanges contracts with another buyer, you’ve been gazumped. If you’re gazumped, you won’t be compensated for money you spent on inspection reports.
In NSW, you have a five-day cooling off period from the time contracts are exchanged. However, be aware that if you decide not to go ahead with the purchase, you’ll lose 25 percent of the purchase price to the vendor. The amount forfeited will be recovered from the deposit you paid.
Any deposit (normally 10 percent is required) will be paid by your solicitor or conveyancer to the real estate agent and held in the real estate agent’s trust account — and the real estate agent has a fiduciary duty to hold that deposit in trust until the sale is completed, upon which time it’s released to the appropriate party, either the seller or the seller’s bank.
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