Real Estate Broker Liability

Instructor: Kyle Aken

Kyle is a journalist and marketer that has taught writing to a number of different children and adults after graduating from college with a degree in Journalism. He has a passion for not just the written word, but for finding the universal truths of the world.

Depending on the relationship you have with your real estate broker, when it comes to misrepresentation or fraud, there are some liability constraints. From the burden of proof to the statute of limitations, there are a few constraints that could hinder the court process when it comes to real estate broker liability.

In most cases, real property sellers use real estate brokerage services to sell their homes. Typically, the real estate broker, or broker, enters into a listing agreement with the seller, which allows the broker to act on behalf of the seller as their agent.

In fact, a real estate broker is usually referred to as the listing broker. The listing broker has many responsibilities, from listing the property to informing multiple listing service (MLS) members of all the facts regarding the sale. On top of selling real property, the broker can also locate property that the seller may wish to purchase. Therefore, it is important to understand the relationship you have with the broker and what they are liable for when it comes to real property.

Broker Relationships

In many cases, the real estate broker is the only source of information and expertise regarding a real property purchase or sale. However, the real estate (selling) broker is not the same as a listing broker. The real estate broker attempts to sell the properties listed in his or her office. However, if the selling broker is not successful he or she must use the MLS and share the sales commission with another broker. Thus, this individual becomes a cooperating broker, a broker who helps another broker make the sale.

There is a clear distinction between the selling and listing broker: it's the seller of the real property who starts the relationship with the listing broker. On the other hand, it is the purchaser who initiates the relationship with the selling broker.

Real Estate Broker's Duties

There are two main duties that a real estate agent has:

  • Fiduciary duties to the purchaser
  • Duties to the other person in the transaction

First of all, the agent's fiduciary duties mean that the agent must act on behalf of the purchaser, have the highest good faith toward them, and have no advantage over them in any transaction. There are a few fiduciary duties that are owed to the purchaser:

  • Duty of Loyalty - Act solely in the best interest of the purchaser
  • Duty to Use Skill, Care, and Diligence - Meeting standards and doing everything reasonable necessary
  • Duty of Full Disclosure - Amount of benefit and agent receives approval from purchaser
  • Duty to Account - For all property and money

Broker Liability

There are many different types of hazards and potential for broker liability , including fraud and misrepresentation, to a breach of duties.

There are five main elements that constitute a fraud:

  • Making a false representation
  • Make a third party change their position
  • Known to be false or no knowledge of whether it is true or false
  • Damage to a third party
  • A third party justifiably relied upon

There are also many different types of false representation:

To unlock this lesson you must be a Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use

Become a member and start learning now.
Become a Member  Back
What teachers are saying about
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account