Fiduciary Duties and Duties to Customers

The Agency Framework: Clients, Customers, and Representation

In real estate practice, understanding the exact nature of your professional relationships is essential. A fiduciary relationship is a relationship of trust and confidence formed between an agent and a principal. In this context, a client is a principal who is represented by a real estate brokerage through an agency relationship, established as permitted by state law. By contrast, a customer receives real estate services without being represented as a client; depending on state law, an agency relationship may arise without a written representation agreement.

A real estate salesperson does not operate entirely independently; a salesperson works under a supervising broker and acts on that brokerage's behalf. Whether and how a salesperson establishes an agency relationship with a client depends on applicable state law and the specific agency arrangements maintained by the brokerage. Because specific agency statutes and legal definitions vary from state to state, candidates must recognize that these principles originate in common law and evolving statutory standards.

The distinction between a client and a customer governs the scope of duties an agent must deliver. Licensees do not owe fiduciary duties to third-party customers. Instead, licensees generally owe customers honesty, fair dealing, and the disclosure of facts required by applicable law, even without an agency relationship. When working with an unrepresented customer, a licensee must clarify whom the brokerage represents and avoid acting as that customer's advocate unless an agency relationship is established as permitted by state law. Because agency disclosure requirements, including their exact format and timing, vary by state, licensees must disclose whom they represent strictly as required by applicable law.