Fiduciary Duty of Real Estate Agent At Issue

At issue in this case was the question of whether a real estate agent owes a home seller notice of the buyer’s financial situation.  Under the facts of the case, the seller listed her home with a licensed real estate agent. Before the sale, she purchased a new lot and began constructing a new home. Because her prior home had not sold, she obtained a bridge loan from a local bank. Under the terms of the loan, she would make interest-only payments until the sale of the first home. A year later, the home still had not sold and the seller “was getting very desperate” and listed the newly constructed home for sale, as well.  Finally, the seller received a call from the realtor who informed her that she had a “different” type of offer to purchase the first home. The interested buyers were “not in a position to obtain a conventional loan,” but “had really good jobs.” The buyers proposed a real estate installment contract, where the seller would, in essence, finance the entire purchase price and the buyers would make monthly payments.  The buyers were to provide a financial statement. The seller signed the agreement after a few hours of negotiations. The buyers wanted to move into the home before closing and the seller refused. 

The problems between the parties began almost immediately. When the seller returned home from a trip, she discovered that the real estate agent had given the buyers a key to the home and they had moved in. That upset the seller because she still had some personal items in the home. However, the buyers made their monthly payments to the seller- albeit a few monthly payments were a week or more late. The seller’s bank refused to renew her bridge loan, as the buyer’s financial documentation was not strong enough to renew the loan. In a desperate situation, the seller began to investigate the buyers- something she should have done before selling the home. She discovered that they were in a bad financial position. Thus, she filed a forcible entry and detainer petition with the trial court, stating that the arrangement was a lease rather than a contract sale. But, the trial court determined that the arrangement was an installment contract and that the seller would not be entitled to damages if the contract were rescinded. 

The buyers moved out of the home and the seller subsequently had the first home foreclosed on and defaulted in her payments for the second home. The seller filed suit against the real estate agent, claiming that the agent had breached her fiduciary duty by not disclosing the buyers’ financial situation. However, the trial court found that the real estate agent did not owe any duty to the seller, and that the buyer’s finances were confidential.  In any event, the court determined that if a fiduciary duty was present, the seller had waived it by accepting payments from the buyers. The seller appealed. 

On appeal, the appellate court affirmed.  Cooper v. Iowa Realty Co., Inc., No. 9-1009/09-0549 (Iowa Ct. App., Feb. 24, 2010).