Functionary vs Fiduciary – another from the archives

I sat in a class a few months ago, and the instructor mentioned something about advising your client. An agent in the back of the room, who was a manager with a company I won’t insult by naming here, raised his hand. He told the instructor he was uncomfortable with him telling agents to give advice to their clients, and in that one sentence pointed out what was wrong with the real estate industry.

Somewhere in this man’s career he fell for the CYA stuff being taught now, rather than the CYC (that C is for client, guess what the A is for) that makes great agents great. It is sad, and probably too easy to blame it on a litigious society, but that certainly plays a big part in it. We are told in “risk mitigation” class to give the client the name of three lenders, and let them decide, give them three home inspectors, and let them decide. I disagree with this. If you want a referral to a lender then I am giving you the name and number of the best lender I know, and pass your information on to them. If you don’t like their personality, then I will give the name and number of the second best. For the home inspection, tell me when you want it. A fantastic home inspector will be there waiting for you ready to inspect the home. Part of our pay is to make sure your home buying or selling experience is smooth. These guys want I should hand you the phone book, and tell you good luck. Even if I know that guy bought a bunch of HVAC systems this summer, because he missed the fact that they were broken on so many inspections, or that that lender never closes on time, and his good faith estimates are always wrong. But, that’s not even the advice the guy above was talking about. He doesn’t want to give you advice on pricing your home, repairs to make, or staging a listing. He wants to do what you tell him, when you tell him, and thinks his service is worth the same as mine. It’s not.

Several years ago, Gary Keller, Dave Jenks, and an author by the name of Jay Papasan went out and interviewed the very top agents in the industry. Their goals was to write a book, and training classes to help other agents achieve this level of success. They found many similarities among these agent’s, but the foremost was their commitment to customer service, and their duties to their clients. There is a great chart in the book that shows the difference between the two levels of agents you find today. The first is the Fiduciary agent. ( defines fiduciary as: One, such as an agent of a principal or a company director, that stands in a special relation of trust, confidence, or responsibility in certain obligations to others.) The obligations are outlined by the state of Maryland as the law of agency, which I keep promising a post on… So, Gary Keller et al came up with this for a fiduciary.

  • They provide a high level of service
  • High Relationship with the client
  • Accepts high responsibility
  • Masters a high skill level
  • perceives information
  • Anticipates needs
  • Interprets data
  • Big picture viewpoint
  • Advises and consults
  • self-directed
  • Maximum legal responsibility
  • partner
  • Owns the results
  • Educates, and guides
  • involved in decision making
  • Uses judgment, and intuition
  • Irreplaceable

On the other hand you have functionary agents, I feel that this is perhaps the majority of the industry any more, though many disagree, and tell me a few bad apples are spoiling the whole bunch. A functionary agent in my mind pushes paperwork. They don’t take the time to sit down with a client, and find what their true goals are. They show houses, write contracts, and show up at settlement. When it comes to listings, they practice what I call the three P’s of real estate. Put a sign in the yard, Put it in the MLS, and Pray it sells. The chart shows a functionary agent does business like this.

  • Low Level of service
  • Low relationship with the client
  • Assumes little responsibility
  • Uses low level of skill
  • Records information
  • Responds to needs
  • Processes data
  • Narrow picture viewpoint
  • Delivers information
  • Other-directed
  • Minimum legal responsibility
  • Employee
  • Does the task
  • Tells and Sells
  • Stays out of Decision Making
  • Follows Rules and Procedures
  • Replaceable (easily replaceable)

This chart hangs in the training room in our office, from day one every new agent, and every agent that transfers from another company knows this is the expectation, and the obligation they have to their clients. Most agents think this is a higher standard, I think it is the standard meant when agency laws were enacted. The laws says we will know our market, the laws says we will not mislead a client, the laws says we will keep up with the current laws.

It goes beyond even the legal to the simple services we provide for our clients. I saw a listing today that had been on the market for 150+ days, and still did not have a picture up. I saw another one where the agent had simply put a period in the internet comments. (We have a required field in the MRIS for internet comments, this is what shows up on every web page that shows comments for a listing) this agent had it blank. He must think print ads will sell the house, maybe he should try to keep up with the times a bit, print is dead to the real estate industry. Twice in the last month I have come across 20+ year agents that did not know how to interpret the standard Maryland contract, twice, I was floored the first time. Twice this month I have heard about listing agents being fired, and then telling the seller they would not release them from the listing agreement without a check. (That’s legal even if it is bad business) I could fill a blog with similar stories not just from my own experience, but from conversations I have with like minded agents around the country.

These are the same agents that consider Zillow a threat to our business, if they have even heard of it… Yes, there are real estate agents that have not heard of Zillow. One reader of this blog posted a comment not long ago that all he needed a real estate agent for anymore was to open the lockbox. Do you think he’s been dealing with agents, or paper pushers?



somdrenter said…


1:06 AM

Patch Tuesday said…

Would it be fair to say that service and knowledge are going to be the key to survival in this game as the market returns to a so-called “normal” state?

And, as for litigation, if you provide the best possible experience, what would there be to litigate that wouldn’t get laughed out of court? If someone really goes the distance for you, the average person wouldn’t have the heart to litigate even if something did go wrong…

8:50 AM

Chris Guldi said…

This is the type of market where great agents thrive, and others die. Most the agents in my office are having their best year ever. 8)

It is true that if you do a good job, and your clients like you, you can usually avoid litigation. I have seen agents do things that should of sent them to court, but their clients liked them. I recently read in a book, I have no idea what book where a study was done on malpractice lawsuits. Doctors with a good bedside manner did not make less mistakes, but they were sued much less then doctors that did not.