Thursday, January 17, 2019

'Customer' vs 'Client' in Florida Real Estate

Customer vs Client in Florida Real Estate

What Are The Differences and Why Is This Important?

Many Florida Real Estate Agents Inadvertently Put Themselves In A Potentially Harmful Situation.

Almost every real estate licensee that I know or have known refers to their customers as their clients. It sounds cool.

At The Climer School of Real Estate, the best real estate school in Orlando, I hear “My client this” and “my client that” all the time. It is something that you are definitely tested on if you want to pass your real estate exam at Pearson Vue.

The problem is according to Florida statute Chapter 475, they don’t have clients. What they have our customers. This is something that is taught in our real estate class every day. 

Florida Real Estate Commission Meeting

And according to Florida statute Chapter 475, there is a gigantic legal difference between the two. In my opinion, and I am not an attorney although I do love Erin Reagan, I believe that most licensees are putting themselves in a potentially dangerous legal situation. I believe this because of how litigious our society is and because I believe that there are many consumers out there who get their jollies from trying to “catch” and trick“ real estate agents into doing something wrong.

In Florida statute Chapter 475.278 there is something called Authorized Brokerage Relationships. In Florida real estate, there are three of these relationships. The Florida Division of Real Estate (DRE) and the Florida Department of Business and Professional Regulation (DBPR), and the Florida Real Estate Commission (FREC) all know these as well.

Because you must learn this in your real estate class to pass your real estate exam, I just made a video explaining what you need to know to pass your Florida Real Estate Exam. Check it out here:

Unit 4 Authorized Brokerage Relationships, Customer vs. Client

The most common is called a Transaction Broker Relationship. In chapter 475(1)(b), it is presumed that all licensees are operating as transaction brokers.

This means that as soon as a licensee is having a conversation with a consumer or a member of the general public, and that consumer or member of the general public discloses some meaningful or confidential information about the real estate in the real estate needs, the transaction broker brokerage relationship has now been created.

One of the important issues that we tried to emphasize of the Climer School of Real Estate that I believe is not emphasized at many others real estate schools is that because the broker owns and controls everything, this brokerage relationship is between the broker and that consumer. The two of them may be in 1000 miles apart. The two of them will probably never meet. But they are in a Florida brokerage relationship.

The Brokers’ licensed Associate is legally a fiduciary general agent representative of their employing broker. This means that they now know that consumer they are talking to the same duties and obligations that Chapter 475 says their broker those that consumer.

When you are in a transaction broker brokerage relationship, according to Florida statute Chapter 475 you have a customer. You owe a customer and limited representation.

Transaction Broker has 'Limited' Responsibilities

Florida statute Chapter 475.01 (1)(d) further defines customer to mean “a member of the public who is or may be a buyer or seller of real property and may or may not be represented by a real estate licensee in an authorized brokerage relationship.”

Transaction Broker has a Customer, not a Client or a Principal

It is also my opinion the most real estate agents spend their entire career as a transaction broker without even knowing it. Most of them are never in a fiduciary Single Agent Brokerage Relationship.

F.S. 475.278 (3) talks about another brokerage relationship called a Single Agent Relationship. This is a fiduciary relationship.

F.S. 475.01 (1)(f) defines “Fiduciary” as “a broker in a relationship of trust and confidence between that broker as agent and the seller or buyer as principal. The duties of the broker as a fiduciary are loyalty, confidentiality, obedience, full disclosure, and accounting and the duty to use skill, care, and diligence.”.

Single Agent has a Client or a Principal, not a Customer

If you pursue the legal definition of a ‘principal’ in a Fiduciary relationship, for example in, a principal is the same thing as a client.

When you have a client or a principal, you will than the fiduciary duties of 100% confidentiality, 100% obedience, 100% loyalty, and 100% for full disclosure.

Single Agent has 100% Fiduciary Responsibilities

You now are legally required to put your client’s or your principal’s best interest is your number one pride of your own best interest. You are legally required to do when they ask you to do as long as not an illegal request.

What licensees don’t realize is that when you refer to your customer as your client, you are possibly creating a single agent fiduciary relationship with your words and actions. If you are involved in a residential sale, you have not disclosed it properly. Regardless of what type of actual transaction you are engaged in, you are not treating your ‘customer’ as a fiduciary principal. I believe that there is a possibility that either of these could come back to haunt you.

The other thing that I hear newer agents doing all the time is promising their new prospects and customers that they will be there for them 100%.

Although I also believe that the intentions are wonderful, legally you are not there for your customers ‘100%’. If you were, then you would be in the Single Agent Fiduciary Brokerage Relationship. Again, you are possibly creating a single agent fiduciary relationship with your words and actions.

Lastly, I was talking to a Broker of a large real estate company who told all of this broker’s agents that they were all operating as Single Agents and to have their customers sign a ‘Consent To Transition To Transaction Broker’ Disclosure at their very first meeting. This Broker teaches them that this is the best of both worlds and to use the consent to transition form whenever they need it.

As a friend, I did tell this Broker that this is not correct and that they were violating FS 475 in a few ways. I am not sure that this Broker believed me or changed this. However, this is not the correct use of the relationships nor the form.

More proof the almost no licensee truly understands the Broker Relationships in Florida Real Estate.

Just keep in mind that if you do find yourself in front of The Florida Real Estate Commission for discipline because your customer or your client turned in a formal complaint on you, the worst thing that you can ever say is “I did not know.”

The Climer School of Real Estate is the Best Real Estate School in Orlando

Since 1984, The Climer School of Real Estate, Orlando’s Premier Real Estate School is The Best Real Estate School in Orlando with the Best Real Estate Instructors in Orlando. We have the best pre-license classes, the best post license classes, the best Spanish classes, and the best live streaming real estate classes in Florida. If you want to have the best chance of passing your Florida Real Estate Exam on your first try, then you need to attend classes at The Climer School. The Climer School of Real Estate is the Number One Real Estate School in Orlando. Call us at 407-822-3926 (EXAM) or stop by our website at . All thoughts and opinions in the blog are the thoughts and opinions of Andy Brown, the best real estate instructor in Orlando, Director of Education & Training.

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