In Texas, a broker's fiduciary duties to a client include all of the following EXCEPT:
Question & Answer
Review the question and all answer choices
Loyalty
Loyalty is a core fiduciary duty requiring brokers to prioritize their client's interests above all others, including their own. This duty means brokers must avoid conflicts of interest and act solely in the client's best interest throughout the transaction.
Obedience
Obedience is a fiduciary duty requiring brokers to follow lawful instructions from their clients. This duty does not obligate brokers to perform illegal acts but requires them to adhere to their client's legitimate objectives and directions.
Guaranteeing profit
Disclosure
Disclosure is a fundamental fiduciary duty requiring brokers to reveal all material facts that could affect a client's decision. This includes disclosing property defects, agency relationships, and any other information that might influence the transaction.
Why is this correct?
Guaranteeing profit is not a fiduciary duty because brokers cannot control market conditions or guarantee financial outcomes. Real estate values fluctuate based on numerous factors beyond a broker's control, making such guarantees impossible to ethically or legally provide.
Deep Analysis
AI-powered in-depth explanation of this concept
Understanding fiduciary duties is fundamental to real estate practice because it establishes the legal and ethical foundation for the broker-client relationship. This question tests knowledge of core fiduciary responsibilities in Texas, where brokers must act in their clients' best interests. The question identifies which duty is NOT part of this relationship. To arrive at the correct answer, one must recognize that while loyalty, obedience, and disclosure are indeed fiduciary duties, guaranteeing profit is not. Brokers cannot promise financial outcomes as real estate markets fluctuate due to numerous factors beyond their control. This question challenges students by including a tempting but incorrect option that might be confused with broker obligations. Understanding this distinction prevents ethical violations and potential legal issues, connecting to broader concepts of agency relationships, disclosure requirements, and professional standards in real estate transactions.
Knowledge Background
Essential context and foundational knowledge
Fiduciary duties in real estate establish the highest legal standard of care between broker and client. In Texas, these duties are established through common law and reinforced by the Texas Real Estate License Act. Brokers owe fiduciary duties to clients when they establish a formal agency relationship, such as through a buyer or seller representation agreement. These duties exist to protect clients who place special trust and confidence in their brokers. The duties persist throughout the agency relationship and typically continue even after the transaction closes, creating ongoing obligations that brokers must understand and fulfill.
LOCDAC - Loyalty, Obedience, Confidentiality, Disclosure, Accounting, Care
Remember that fiduciary duties start with LOCDAC. Any duty not in this acronym, like guaranteeing profit, is not a fiduciary responsibility.
When questions ask about fiduciary duties, immediately recall the core duties (LOCDAC). Any option suggesting brokers guarantee financial outcomes is likely incorrect as brokers cannot control market results.
Real World Application
How this concept applies in actual real estate practice
A seller lists their home with a Texas broker, expecting to make a $50,000 profit from the sale. During the listing period, the market shifts, and comparable properties are selling for less than anticipated. Despite the market change, the seller pressures the broker to guarantee they will still make their expected profit. The broker must explain that while they will fulfill their fiduciary duties including loyalty, obedience to lawful instructions, and full disclosure of market conditions, they cannot guarantee the final profit amount as this would be beyond their control and not a fiduciary duty.
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