When an agent represents a client, that agent owes the highest standard of care and loyalty recognized by law — the fiduciary standard. Texas real estate practice recognizes six core fiduciary duties, memorized with the acronym OLD CAR:
O — Obedience: Follow all lawful instructions of the principal. The agent must act on the client's directions even if the agent personally disagrees. The caveat is critical: the instruction must be lawful. An agent is never required (and is not permitted) to follow instructions that would violate TRELA, TREC rules, or fair housing law.
L — Loyalty: Place the client's interests above all others, including the agent's own financial interest. A classic loyalty violation: an agent steers a buyer toward a property where the agent earns a larger commission, rather than the property that best serves the buyer's needs.
D — Disclosure: Proactively tell the client all information that is material to the transaction and that the client would want to know. This includes known defects, zoning changes, planned development nearby, and information about the other party's situation that could affect negotiating position.
C — Confidentiality: Protect the client's private information — financial limits, personal motivation, willingness to negotiate — both during and after the agency relationship. The duty of confidentiality survives the termination of the agency relationship. A former agent cannot disclose a client's confidential negotiating position to a competitor even years after the relationship ended.
A — Accounting: Maintain accurate records of all funds and property belonging to the client. Account promptly for any money received. Do not commingle or convert client funds. This duty is directly linked to the broker's trust account obligations.
R — Reasonable Care and Diligence: Bring professional competence to the representation. Know the market, understand contracts, identify material issues, meet deadlines, and perform at the standard of a reasonably competent licensee.
Non-clients — the other party to a transaction — receive a lesser standard: honesty and disclosure of material facts. For example, a seller's agent must honestly disclose to the buyer that the basement floods regularly (a known material fact), even though the agent represents the seller. But the seller's agent does not owe the buyer advice on whether to lower their offer.
Real-world example: A buyer's agent, knowing her buyer has a $450,000 budget, presents the buyer's $390,000 offer on a $400,000-listed home. After the transaction closes, the same agent gets a listing on the same property when the buyer decides to sell two years later. The agent cannot disclose to the new seller that the original buyer (now seller) had budgeted up to $450,000 — that was confidential information from the earlier representation, and the duty of confidentiality survives.
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Quiz Questions:
Q1. Under the OLD CAR framework, which duty requires an agent to tell a buyer client that the seller has just accepted a competing offer and is likely under extreme time pressure?
A) Obedience B) Loyalty C) Disclosure D) Accounting
Answer: C — Disclosure requires the agent to proactively share all material information the client would want to know. A seller under time pressure is material to negotiations — the buyer's agent must share this if known.
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Q2. A buyer's agent recommends a property to her client and earns a referral fee from the property developer without telling the client. Which fiduciary duty is most clearly violated?
A) Obedience B) Loyalty C) Confidentiality D) Accounting
Answer: B — Receiving an undisclosed financial benefit that influences the agent's recommendation is a loyalty violation. The agent placed their own financial interest (the referral fee) above the client's interest (unbiased property recommendations). This may also violate TREC's compensation disclosure rules.
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Q3. A listing agreement expires without a sale. Six months later, the former listing agent is approached by another buyer who wants to make an offer on the same property. Can the former agent share the seller's previously disclosed minimum acceptable price with this new buyer?
A) Yes, because the agency relationship has ended and confidentiality only applies during the contract term B) No, because the duty of confidentiality survives the termination of the agency relationship C) Yes, because the new buyer is now the agent's client and loyalty to the new client overrides prior confidentiality D) No, unless the seller provides written permission to disclose the information
Answer: B — The duty of confidentiality under Texas fiduciary law survives the end of the agency relationship. A former agent cannot disclose information received in confidence from a former client, even after the listing has expired.
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Q4. A seller instructs her listing agent not to show the property to any buyers who are of a particular national origin. The agent should:
A) Follow the instruction because the duty of obedience requires compliance with all client directions B) Refuse the instruction because it violates fair housing law, which overrides the obedience duty C) Follow the instruction only if the seller has a documented, non-discriminatory reason for it D) Follow the instruction and disclose it to TREC proactively to document compliance
Answer: B — The duty of obedience applies only to lawful instructions. An instruction to discriminate based on national origin violates the federal Fair Housing Act and Texas law. No fiduciary duty requires an agent to comply with unlawful instructions.
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Q5. A seller's agent knows the property has a history of foundation movement that the seller did not disclose on the seller's disclosure notice. What obligation does the agent have?
A) No obligation; the seller's disclosure notice is the seller's responsibility and the agent cannot override it B) The agent should tell the buyer only if the buyer specifically asks about the foundation C) The agent must independently disclose the known material defect to the buyer, regardless of what the seller disclosed D) The agent may remain silent to protect the client's interest under the duty of confidentiality
Answer: C — Agents have an independent duty to disclose known material facts to all parties, including non-clients like the buyer. The seller's failure to disclose does not relieve the agent of their own disclosure obligation. An agent who conceals a known material defect faces TREC disciplinary action and potential civil liability for fraud.