Reviewed May 2016
A “professional” is a person who has received special or advanced education in a particular occupation and is capable of providing competent services to others who are less knowledgeable. A professional has a duty to provide services consistent with the standard of care in the industry. We expect this from doctors and lawyers. The buying and selling public deserves that same degree of professionalism from real estate brokers and agents.
As a real estate professional, it is important to be knowledgeable about the standard of care in the industry. The failure to act professionally often involves conduct that falls below the standard of care, which may result in both an unsatisfied client and legal liability.
What is the standard of care for a real estate broker or agent?
The law requires that a real estate broker or agent (hereinafter “broker”) exercise that degree of care that a reasonable broker would exercise in the same or similar circumstances. A broker complies with the standard of care by performing the broker’s duties with reasonable care and skill. For example, a listing broker must exercise reasonable care to sell the seller’s property at the best price and terms. Vivian Arnold Realty Co. v. McCormick, 19 Ariz. App. 289, 506 P.2d 1074 (1973). Stated another way, a broker must “exercise reasonable due care and diligence to effect a sale to the principal’s best advantage.” Haldiman v. Gosnell Development Corp., 155 Ariz. 585, 588, 748 P.2d 1209, 1212 (App.1987).
What is reasonable care?
Reasonable care in the course of a transaction will vary depending on the situation. Therefore, the specific disclosures, advice and counsel required of a broker depend on the facts of each transaction, the knowledge and the experience of the client, the questions asked by the client, the nature of the property and the terms of the sale.
Do the Commissioner’s Rules prescribe the standard of care?
The Arizona Department of Real Estate’s Commissioner’s Rules can form the basis for the standard of care. For example, in Lombardo v. Albu, 199 Ariz. 97, 14 P.3d 288 (2000), the Court stated that Commissioner’s Rule R4-28-1101 prescribed an appropriate standard of care in that case, which was the duty to disclose any information relating to the buyer’s inability to perform. Therefore, a broker should be familiar with the Commissioner’s Rules and stay updated on any revisions.
What happens if a broker’s conduct falls below the standard of care?
The broker is subject to legal liability. If a broker’s conduct fell below the standard of care, the broker is negligent. Once a broker’s negligence is established in a lawsuit, the broker will be held liable to the plaintiff for all damages caused by the broker’s negligent conduct.
What does a plaintiff in such a lawsuit have to prove?
To prevail in a lawsuit, a plaintiff must prove that the broker’s conduct fell below the standard of care by failing to use the skill, prudence and diligence that other real estate brokers commonly exercise. Also, a plaintiff must prove that the broker’s conduct caused harm to the plaintiff.
In a lawsuit, who decides if a broker fell below the standard of care?
After listening to all the testimony or evidence, the “trier-of-fact” decides whether a broker fell below the standard of care. The “trier-of-fact” is generally a jury, but may also be the judge or arbitrator in the case.
How does the trier-of-fact know what the standard of care is?
The standard of care is generally established by expert testimony, unless the conduct required by the particular situation is within the common knowledge of a layperson. Therefore, a plaintiff who alleges that a broker acted negligently usually must present testimony of a qualified expert, i.e., another broker, that the defendant broker acted unreasonably and breached the standard of care.
How can a broker keep informed as to the standard of care in the industry?
A broker can take advantage of quality educational programs and become involved in professional organizations. Advanced education and professional development will enable brokers to maintain a high level of professionalism, provide better service to their clients and avoid legal liability. Remember, in court, expert brokers establish the standard of care. Strive to be one of those experts.