![]() In any breach of duty, which, without an actually fraudulent intent, gains an advantage to the person at fault, or any one claiming under him, by misleading another to his prejudice …. ![]() This is codified in Civil Code § 1573, which defines Constructive Fraud as: A fiduciary’s failure to share material information with the principal is constructive fraud, without actual fraudulent intent. Real Estate Broker Fiduciary Duty and Constructive FraudĪ fiduciary must tell its principal (the client) all information it possesses that is material to the principal’s interests. In essence, the fiduciary duty owed by real estate brokers to their clients is substantially more extensive than the nonfiduciary duty codified in section 2079. Thus, a broker can be professionally competent under Civil Code § 2079 (and § 2079.2 as well) but still fall short of the greater duty of a trusted fiduciary. ‘The standard of care owed by a broker under this article is the degree of care that a reasonably prudent real estate licensee would exercise and is measured by the degree of knowledge, education, experience, and examination, required to obtain a license …” The standard of care owed by a real estate broker is further defined in Civil Code § 2079.2: Real Estate Broker Standard of Care and Fiduciary Duty Under § 2079, a real estate broker or salesperson has a duty to a prospective buyer of residential real property with one to four units to conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to the prospective buyer all facts materially affecting the value of desirability of the property that an investigation would reveal, if that broker has a written contract with the seller to find a buyer or is a broker who acts in cooperation with that broker to find or obtain a buyer. The broker fiduciary duty is greater than the negligence standard of due care of under Civil Code § 2079. The broker’s fiduciary duty to the client requires the utmost good faith and undivided service and loyalty. Under California law, a real estate broker has a fiduciary duty to their client. However, the most important duty a real estate broker owes to their client is undoubtedly their fiduciary duty, a duty that is substantially greater than their duty of standard of care. There are multiple levels of duties owed to the client, both statutory and common law. So, to avoid a conflict of interest, because you cannot have an Agency relationship (Buyer and Seller) with two parties in the same transaction, nor can you be a Transaction Broker (ie Neutral) for one party in a transaction and an agent (ie not Neutral) for the other, Mary's choices are: a) terminate the Buyer Agency Relationship making the Buyer a "customer" and not a "client", b) Tell the buyer to get another agent c) Become a Transaction Broker (neutral) for both parties.Lawsuits and litigation frequently arise from California real estate transactions over the duties and disclosures a real estate broker is required to make to their client. Transaction Broker does not create an agency relationship. Since the buyer is a "Client" he has a Buyer's Agency agreement with Mary because a buyer can only become a "Client" with a Buyer's Agency relationship. Since Mary has a property listed, she is either a Seller's Agent or a Transaction broker for the Seller. (In this question, Mary has to resolve a conflict of interest. Terminate the buyer agency agreement and let John become a customer terminate the buyer agency and let John find another agent become a transaction broker to both parties.
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