• Home

Subscribe

Real Estate Agents Obligations to Vendors

The moment a Jamaica real estate agents accepts employment as a single agent, the broker is accepting a fiduciary relationship with the employer (principal). Thereafter, failure by the broker or employed salespeople to perform all legislated obligations may be construed as fraudulent or dishonest dealing if the principal suffers any loss or damage. The legislated duties of a fiduciary include the following six obligations:

Duty of obedience

The broker or agent is at all times obligated to act in conformity with the principal’s instructions as long as those instructions are legal and relevant to the contractual relationship. If a broker feels that carrying out the principal’s legal directions will harm the principal, then the broker must promptly inform the principal of all known facts along with the broker’s opinion. However, if the principal will not change the instructions, the broker must either carry them out or withdraw from the relationship. Illegal instructions may not be carried out. This was the case in the past with several properties for sale in Montego Bay Jamaica where the homes had exceeded their boundary size and the developers still instructed the agents to sell.

Obtain the best price and terms

A Jamaica realty agent, employed by a principal to represent that principal in a Jamaica real estate transaction, hold himself or herself out to the public as specially qualified by reason of experience, ability and knowledge. If a broker’s principal is a buyer, then the broker should attempt to obtain the Jamaica property at the lowest price possible. If the principal is a seller, then the broker should try to get the seller the most favorable price. Brokers should discuss with their principals any anticipated tax consequences and to seek expert Jamaica property tax advice when appropriate

Duty of disclosure

It is a broker or agent’s duty to keep the principal fully informed at all times of all the facts or information obtained that might affect the transaction or value of the property. Included in this obligation is a duty of discovery to pursue aggressively the interest of the principal. For example, failing to detect a change in zoning or a new school to be built could make an agent liable for any loss incurred by a principal. Agents may be held responsible for material facts they should have known and communicated to their principal but did not. Also, broker or agents must inform their employers, for example, if a buyer cannot qualify for a loan or if a personal relationship exists between the agent and buyer. All material facts must be revealed to the principal even if the disclosure of such facts might cause the transaction to fail.

Avoid Personal Interest

Full, fair and prompt disclosure also includes notifying the principal if the broker is personally interested in buying the listed property is required. The broker must refrain from becoming financially interested in property that the principal is attempting to sell or buy. Should the broker become interested, however, the broker should clearly explain to the principal that the broker-principal relationship is terminated and thereafter may act as an individual to buy the property. But it is not sufficient for the principal to know of and approve the action of a broker to buy the Jamaica property in question. In addition to informing the principal of intention to buy the property, the broker advises the principal of every fact that he or she has knowledge of regarding the subject property that might reasonably be expected to influence the principal’s decision to buy or sell.

In such an event, the broker must clearly terminate the agent-principal relationship and inform the principal of all facts regarding the property that the broker has learnt while in an agent’s capacity. Otherwise, the broker could buy from the principal and subsequently sell at a higher price and keep the profit (’overage’ -secret profit or secret commission).

To do so, could be construed as fraud, misrepresentation, concealment and or dishonest dealing and could expose the broker to be liable to both the seller and buyer for the full amount of the secret profit.

Loyalty- protect principal’s interest above all others

The first of the specific duties that every broker or agent owes to the principal is loyalty to the trust delegated. The duty of loyalty basically embodies all the other duties to some degree. The agent as fiduciary in real estate transaction must be alert to avoid any situation that might breach the duty of undivided loyalty to the principal. Loyalty (faithfulness) requires the broker to always place the principal’s interests above those of other persons with whom the broker deals. Courts have ruled that for brokers to be loyal to their principal, they cannot exercise duties in such a manner as to profit themselves or anyone else at the expense of the principal.

Duty to avoid adverse interests

A broker must refrain from acting on behalf of adverse interests against the principal’s interests. A broker may not attempt to list property for sale from the purchaser with the knowledge that the property can be sold at higher price, while purporting to represent the principal, the seller. However, after a contract for sale between principal and buyer is consummated and the sale has been arranged the broker can list the property from the buyer for resale.

Duty of confidentiality

Much of the information a broker gains while employed by the principal is confidential. Without the principal’s permission, an agent cannot reveal to third party personal or private information that might damage the principal’s bargaining position. For example, the fact that a seller is forced to sell due to poor health or loss of a job cannot be told to a buyer without the principal’s permission. The broker cannot divulge confidential information learnt during the course of the agency even after the transaction when the agent-principal relationship has ended. A broker is never free to use confidential information to the disadvantage of or reveal any harmful or unfavorable information about a former principal. Sellers are responsible however, for revealing hidden or latent defects and should be so advised by their agents. A ‘latent’ defect is a property shortcoming know to the seller but not to the buyer and not discoverable by ordinary inspection.

Duty not to bind Principal

The broker must refrain from unauthorized acts or promises on behalf of the principal. As would be expected, the unauthorized acts of a broker are not normally binding on a principal. However, if the principal gives the broker greater authority than normal, the principal is bound. It is the duty of a broker to avoid actions or statements that might embarrass the principal or jeopardize the transaction. Unless a broker has been authorized specifically by a principal, he or she should not make promises or representation regarding, for example, the quality and value of Jamaica land or the state of the title to listed lands. When properly authorized, a broker may conclude binding contracts for the principal and may also make decisions regarding price and terms.

Duty to act in good faith

The final obligation of a broker is to act in good faith with the principal. This obligation automatically rules out any statement, act or conduct that is not open and above board. This includes the duty to preserve and maintain the property or funds of the principal to the best of the broker’s ability. All brokers are absolutely prohibited from commingling or intermingling their own funds or Jamaican property with those of a principal’s. A broker or agent must be able to account for (track or explain) all monies, funds or property received from or on behalf of the principal. Such holdings are considered trust funds or escrow funds. Money and valuables entrusted to an agent should be kept separate from the agent’s funds. The broker is not entitled to any trust or escrow funds until they become the property of the principal. Brokers are required to keep complete records of all transaction and funds.

The duty of using care, skill and diligence does not end with the signing of a contract; it continues via numerous services by the agent until the transaction is properly closed. If an agent does not perform with the required degree for care, skill and due diligence, the agent becomes liable to the principal for the damages the principal may have sustained.

In the Jamaica real estate business a licensee or agent caught up in the fascinating pursuit of a sale, may be tempted to forget the interests of the principal. To do so is wrong, unethical and illegal. Most agency relationships in real estate begin with a listing contract wherein both parties make valuable promises. Thereafter, if the principal’s interests are subordinated to those of the broker, a salesperson, a prospect or anyone else, the broker has breached the listing contract, thereby committing an illegal and unethical act.

Courts have ruled that the converse of a broker or agent’s duty of full disclosure to the principal is the duty not to reveal confidential information to prospective buyers. A broker or agent and employed salespersons violate this duty if they reveal to a prospective buyer that the principal may take less than the listed price for a property. Whenever brokers or salespersons make a statement such as “They are asking $4.m but I think you can get $3.8m” they are not only sacrificing the interests of their employer, but they are also violating a fiduciary relationship if the seller is the principal. One of the basic requirements of a professional is integrity. This requires a constant awareness of the very special relationship between a principal and his/her agent, including subagents.

There is always a potential conflict when brokers are so eager to obtain listings that they agree to list at a price they know is higher than market value. In fact, there is considerable evidence to indicate that the frequently expressed attitude “Never turn down a listing” may be unethical. This could be true when a broker lacks the expertise to handle a special type of property or the property is geographically located where the broker or salesperson cannot diligently look after it. Failure to use diligence throughout the term of a listing is unethical.

Setting a competitive market price for a Jamaican real estate property for sale in Montego Bay is important. The ethical professional will point out to the seller that:

- A property listed at a competitive price attracts more potential buyers than an overpriced property will.

- Other real estate agents prefer not to show property priced above market value.

- Overpriced property is often priced out of the reach of ready, willing and able buyers who might buy the property at market value.

- Overpricing a property has frequently caused one or more family members to remain in the area until time and lack of buyer interest force a reduction in price; and

- Inflated prices irritate some buyers to the point that they will not even submit a lower offer on such properties. Ethical brokers do not accept a listing unless they believe that the property is priced reasonably near market value.

Copyright © 2008 www.mga-inc.com |

| · Log in

Loans