Comment by Robert S. Rooth
The real estate broker engaged by a vendor of property has traditionally owed no fiduciary duties to prospective purchasers. Applying the general principles of agency law to the vendor-broker relationship, courts have deemed the broker the agent of the vendor alone. As an agent, the broker is a fiduciary with respect to the vendor and must act in his principal's best interests to obtain the best possible price for the property; he owes the vendor duties of loyalty, fidelity, care, and disclosure, and these duties apparently foreclose concurrent fiduciary duties of the broker to third parties.
To conclude, however, that the real estate broker legally represents the seller alone is to ignore the realities of modern real estate brokerage. The legal relations of the parties must vary with the operative facts of particular transactions; complexity is increased by the involvement of at least three parties—the broker, the purchaser, and the seller—each having distinct interests. The vendor and the purchaser naturally have antagonistic interests as to the price and terms of the sale, but other opposing interests arise out of the tripartite relationship.
The interests of the broker and the vendor are implicitly adverse if the broker's commission is contingent on his procuring a purchaser. Arguably, the broker's paramount concern is to secure a reasonable and certain sale, rather than to prosecute the vendor's interest so doggedly as to risk losing the sale. By contrast, the vendor normally expects to pay a commission only if a sale is consummated, despite the general rule that the broker earns his commission upon procuring a prospective purchaser who is "ready, willing, and able" to enter an enforceable contract of sale on terms stipulated by the vendor.
The real estate broker has ready access to information on land values, patterns of land use, availability of financing, and zoning requirements, which may not be available to purchasers. The broker, therefore, stands in the best position to evaluate the terms of the transaction, not only by reason of his broad experience, but also because he is acquainted with the parties and is closest to the negotiations. Since individual residences are purchased infrequently, and their quality and condition are difficult to evaluate without experience, purchasers often repose their trust in the broker, despite his relation to the vendor. Moreover, the complexity of closing and financing the transaction causes purchasers to look to the broker for advice. As a result of licensing statutes elevating brokerage to the status of a profession and requiring high standards of competency, trustworthiness, and honesty for qualification, brokers enjoy a virtual monopoly in their field.
These factors have caused some jurisdictions, including Louisiana, to relax the traditional rule that the real estate broker owes duties only to the vendor. The purpose of this comment is to examine the various methods used to impose duties on the broker toward prospective purchasers and the nature of these duties in Louisiana and in common law jurisdictions.
About the Author
Robert S. Rooth.
Citation
52 Tul. L. Rev. 157 (1977)