What is “Vicarious Liability?”

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Most of us call them “real estate agents,” but this has become a generic term for any licensed real estate professional.  It doesn’t necessarily mean that they are really legally an “agent” of the buyer or seller.  In fact, few are these days.  Laws vary by state, but in almost every state there are different ways in which a real estate professional or broker can represent you as a buyer or seller.  These days, most of them are in some “non-agent” status of representation.

They can be called anything from a “transaction broker” to a “transaction facilitator,” in legalese, but they’re still called real estate agents by the masses.  In these other more common representation relationships, they have different state requirements for their duties to their customers and clients, and normally must be “fair” to all parties, but put their customer’s/client’s interests above their own.

They’ll also probably have some disclosure form for buyers and sellers that specifies their duties based on the representation relationship.  In most cases, they are not allowed to divulge to the other side any information about their buyer or seller client that would damage their ability to negotiate a good deal.  So, when are they an “agent” and what does this mean for their client?

In most cases these days, there must be a form signed by the agent and client that specifically designates them as an “agent.”  This requires a higher level of service and care, and adds “fiduciary” duties to their obligations to clients.  The reason for this article is to let the average consumer know that there is a level of liability or risk taken on by the customer/client if they choose to work with a true legal “agent” rather than in another representation relationship.

If your real estate professional is your legal “agent,” you take on the risk of “vicarious liability.”  This means that should the agent do something wrong or illegal while serving you, it’s possible that you could also be held liable if you knew about it (even if you didn’t know it was illegal).  This is why some attorneys buying or selling real estate specifically state they do not want an “agency” relationship.

Doug Clark
Star of Spike TV’s FLIP MEN
RealtyTrac Education Partner
#1 Real Estate Coach and Mentor Worldwide
Follow @demo_doug

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About the author

Doug Clark

Star of Spike TV's FLIP MEN. RealtyTrac.com Training Partner. #1 Real Estate Trainer Worldwide

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