TL;DR
Fiduciary duties are the core legal obligations a Texas real estate agent owes to their client (the principal). On the TREC Sales Agent exam, fiduciary duties appear in both the National portion (general agency law) and the State portion (Texas-specific applications). The classic six fiduciary duties — often remembered by the acronym OLD CAR — are Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable Care. In Texas, these duties apply when an agent represents a client under either a listing agreement (representing the seller) or a buyer representation agreement (representing the buyer). The duties shift when an agent acts as a Texas intermediary — a unique Texas role where the brokerage represents both buyer and seller in the same transaction with modified duties. Knowing each duty, when it applies, what behaviors fulfill or violate it, and how Texas's intermediary structure changes the standard duties is essential exam material.
What "Fiduciary" Actually Means
A fiduciary is someone who has accepted a legal and ethical obligation to act in another person's best interest. The relationship is one of trust and confidence — the principal trusts the agent to put the principal's interests above the agent's own. Fiduciary obligations are taken seriously in courts, and breaches can result in commission disputes or potential forfeiture, license discipline, and lawsuits.
When a Texas real estate agent signs a listing agreement or buyer representation agreement, they become a fiduciary to that client. Until the agreement is terminated, the agent is legally required to fulfill all fiduciary duties — even when doing so is inconvenient or financially adverse to the agent.
The Six Fiduciary Duties — OLD CAR
The most common acronym for memorizing the fiduciary duties is OLD CAR:
- O — Obedience
- L — Loyalty
- D — Disclosure
- C — Confidentiality
- A — Accountability
- R — Reasonable Care
Some study materials use slightly different wording (e.g., "Care, Obedience, Accounting, Loyalty, Disclosure" or "COALD"). The substance is the same — six core obligations. We'll cover each in detail.
1. Obedience
The agent must follow the lawful instructions of the client. If the seller says "don't show the house on Sundays" or "I won't accept any offer below $300,000," the agent must comply.
Critical limit: The duty of obedience extends only to lawful instructions. If a client instructs the agent to lie, withhold material facts from a buyer, discriminate against protected classes, or commit any illegal act, the agent must refuse.
Example violations:
- Agent ignores seller's instruction not to disclose certain information to potential buyers (violates obedience)
- Agent follows client's instruction to lie about a property defect (violates the law — agent must refuse despite client instruction)
2. Loyalty
The agent must put the client's interests above their own, the brokerage's, or any other party's. This is the most encompassing duty and overlaps with several others.
Practical applications:
- Agent cannot accept a lower offer just because it closes faster (faster closing benefits agent's commission timing, not necessarily client)
- Agent cannot favor a buyer who's also their personal friend over another buyer if the friend's offer is worse for the seller
- Agent cannot recommend their own services (mortgage lender, home inspector) without disclosing the relationship and confirming the client genuinely benefits
Example violations:
- Agent steers client toward a property that pays a higher commission (loyalty violation)
- Agent buys the property themselves at a lower price after telling the seller "no offers came in" (severe loyalty violation + likely fraud)
3. Disclosure
The agent must disclose all material facts to the client that could affect the client's decisions. This is one of the most heavily tested duties because the rules differ significantly based on whether the agent represents the seller or the buyer.
For a listing agent (representing seller):
- Must disclose to the seller all material facts that affect the property's value or the transaction
- Must disclose to the seller the existence and terms of all offers received
- Must disclose any conflicts of interest (e.g., if the agent's family member is the buyer)
For a buyer's agent (representing buyer):
- Must disclose to the buyer all material facts about the property the agent knows or could reasonably know
- Must disclose any defects observed during showings
- Must disclose material conditions or events when Texas law requires disclosure, particularly for environmental hazards and other legally material issues
Texas-specific: Texas has specific disclosure requirements under the Texas Property Code, including the Seller's Disclosure Notice, the Lead-Based Paint Disclosure (federal, for pre-1978 homes), and notices for properties in special districts (HOAs, water districts, etc.). Agents must ensure these are properly executed and disclosed.
4. Confidentiality
The agent must keep the client's confidential information private — including pricing strategies, motivations for selling/buying, personal financial information, and any information that could weaken the client's negotiating position if disclosed to the other party.
The confidentiality obligation generally continues after the agency relationship ends. Even after a transaction closes (or a listing expires), the agent must continue to keep confidential information confidential, well beyond the end of the transaction. Agents cannot use a former client's confidential information to benefit a new client.
Example violations:
- Listing agent tells a buyer "the seller is desperate and will accept anything above $250,000" (confidentiality violation)
- Buyer's agent tells the seller "my client really loves this house and will pay full price" (severe confidentiality violation that destroys the buyer's negotiating leverage)
Critical exception: Confidentiality does NOT apply to material facts the agent is legally required to disclose. If a client tells the agent "the foundation is cracked but don't tell anyone," the agent cannot keep that secret — material defects must be disclosed.
5. Accountability
The agent must account for all funds and property entrusted to them by the client. In Texas, this primarily means proper handling of earnest money deposits.
Practical applications:
- Earnest money must be deposited in a properly designated escrow or trust account, not the agent's personal or operating account
- Agent must keep accurate records of all funds received and disbursed
- Agent must account for all property keys, documents, and other items entrusted by the client
TREC violation triggers:
- Commingling client funds with personal funds
- Conversion (using client funds for personal purposes)
- Failing to deposit earnest money within required timeframes
- Failing to maintain accurate records
These are among the most serious violations and can result in immediate license suspension or revocation in Texas.
6. Reasonable Care
The agent must exercise the skill, care, and diligence that a reasonably competent real estate agent would use in the same situation. This includes proper market analysis, accurate pricing recommendations, professional handling of paperwork, and knowing when to refer the client to specialists (attorneys, inspectors, appraisers).
Practical applications:
- Conducting a competent comparative market analysis (CMA) before recommending a list price
- Properly preparing and explaining TREC promulgated forms
- Recognizing when a transaction needs an attorney's review (e.g., complex tax issues, unusual contract terms)
- Recommending qualified inspectors and appraisers
Common violations:
- Setting an unrealistically high list price to win the listing, then continually pushing for price reductions
- Failing to recognize or communicate visibly apparent issues a reasonably competent agent would notice
- Drafting contract language beyond agent authority (which is also a violation of TREC promulgated form rules)
When Fiduciary Duties Apply (and When They Don't)
Fiduciary duties apply only to clients — people the agent has a representation agreement with. They do NOT apply to customers — people the agent works with informally without an agreement.
The Texas distinction:
- Client: A buyer or seller who has signed a representation agreement (listing agreement or buyer representation agreement). Agent owes them full fiduciary duties.
- Customer: A buyer or seller the agent works with but does NOT represent. Agent owes them basic honesty and the duty to disclose material facts, but NOT the full fiduciary duties.
Example: A buyer walks into an open house and asks the listing agent questions about the property. Unless that buyer signs a buyer representation agreement with the agent, they're a customer — not a client. The listing agent represents the SELLER and owes fiduciary duties only to the seller. The agent must still be honest with the buyer and disclose material facts, but the agent is not the buyer's advocate.
This distinction is heavily tested on the TREC exam because new agents often confuse it.
The Texas Intermediary Role (Unique to Texas)
Texas has a unique agency structure called the intermediary that modifies the standard fiduciary duties. When a brokerage's listing agent and a buyer's agent within the same brokerage have clients on opposite sides of the same transaction, the brokerage acts as an intermediary representing both clients — but with modified, balanced duties.
Key rules of Texas intermediary:
- Written consent required. Both the buyer and seller must consent in writing to the intermediary relationship before the agent can proceed. This is typically done at the time of signing the representation agreement.
- The brokerage is the intermediary, not the individual agent. The brokerage acts as the intermediary through the sponsoring broker's authority; the individual agents may continue to advocate for their own clients within limits set by the broker.
- Modified disclosure duties. The intermediary cannot disclose either party's confidential information to the other (e.g., the buyer's maximum price or the seller's minimum acceptable offer) unless authorized.
- Equal treatment. The intermediary brokerage must treat both parties fairly and protect each party's confidential information while following Texas intermediary rules.
Why this matters: Texas intermediary is fundamentally different from "dual agency" in many other states (where dual agency is often prohibited or heavily restricted). Texas explicitly permits intermediary with proper disclosure and consent.
For more detail on intermediary mechanics, see our guide on Texas intermediary vs dual agency.
Common TREC Exam Questions on Fiduciary Duties
Pattern 1: Identifying a duty violation "A listing agent tells a buyer that the seller will accept any offer above $250,000 because the seller needs to close before relocating for a new job. Which fiduciary duty has the agent violated?" → Confidentiality (the seller's motivation and acceptable price range are confidential information).
Pattern 2: Identifying when duties apply "An agent at an open house provides information to walk-in visitors. Does the agent owe fiduciary duties to those visitors?" → No. The visitors are customers, not clients. The agent owes them honesty and material-fact disclosure but not full fiduciary duties.
Pattern 3: Distinguishing duties to client vs customer "What does a Texas real estate agent owe to a non-client buyer at a showing?" → Honesty, fairness, and the duty to disclose any material defects the agent knows about. Not loyalty, confidentiality, or the other client-only duties.
Pattern 4: Lawful vs unlawful instructions "A seller instructs their listing agent not to show the property to families with children. The agent has signed a listing agreement. Must the agent follow this instruction?" → No. The instruction is unlawful (Fair Housing Act violation). The duty of obedience extends only to lawful instructions. The agent must refuse and may need to terminate the listing.
Pattern 5: Intermediary mechanics "In a Texas transaction where the same brokerage represents both buyer and seller, what is required for the brokerage to act as an intermediary?" → Written consent from both parties, equal treatment of both parties, and modified disclosure duties (cannot disclose either party's confidential information).
Common Exam Traps
- Confusing "client" and "customer." Only clients receive full fiduciary duties. Walk-in buyers at open houses are customers unless they sign representation agreements.
- Confusing "duty of obedience" with "duty to follow any instruction." Agents must refuse unlawful instructions, even from clients. Exam questions often test this with subtle Fair Housing violations.
- Assuming confidentiality always wins. Material facts about property defects, environmental hazards, and legal disclosures must be revealed even if the client wants them concealed.
- Forgetting confidentiality survives. Even after a transaction closes, the agent cannot use the former client's confidential information against them or for a new client's benefit.
- Confusing Texas intermediary with dual agency. Texas permits intermediary with proper disclosure; many other states prohibit dual agency outright. Texas exam questions specifically test the intermediary structure.
Frequently Asked Questions
- What are the six fiduciary duties in Texas real estate?
- The six fiduciary duties are commonly remembered with the acronym OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable Care. Some study materials use COALD or other arrangements, but the six substantive duties are the same. Each duty applies when an agent represents a client (someone who has signed a representation agreement), not when the agent simply works with a customer (a non-represented party).
- What's the difference between a client and a customer in Texas real estate?
- A client is someone the agent represents under a written representation agreement (listing agreement for sellers, buyer representation agreement for buyers). A customer is someone the agent interacts with but does not represent — for example, a walk-in buyer at an open house who has not signed a buyer representation agreement. The agent owes full fiduciary duties to clients, but only honesty and material-fact disclosure to customers. The TREC exam frequently tests this distinction.
- Can a Texas real estate agent represent both buyer and seller in the same transaction?
- Yes, through Texas's intermediary structure, but only with written consent from both parties. When a brokerage's agents have clients on opposite sides of the same transaction, the brokerage can act as an intermediary, representing both with modified fiduciary duties. The intermediary cannot disclose either party's confidential information to the other and must treat both parties fairly. This is different from "dual agency" as defined in many other states; Texas's intermediary structure is unique.
- What happens if a Texas real estate agent breaches a fiduciary duty?
- Consequences vary by the severity of the breach. Minor breaches may result in commission disputes or contract termination. Significant breaches can result in TREC license discipline (fines, education requirements, suspension, or revocation), civil lawsuits from the client (potentially seeking damages including return of any commission paid), and in cases involving fraud or theft, criminal charges. Breaches involving misuse of client funds (accountability violations) are among the most severely punished.
- How long do fiduciary duties last after a transaction closes?
- Most fiduciary duties end when the agency relationship ends (when the listing or buyer representation agreement is terminated or the transaction closes). However, the duty of confidentiality typically continues indefinitely — agents must keep client confidential information private even after the relationship ends. An agent cannot use information learned from a previous client to benefit a new client or themselves. The accountability duty also continues as it relates to records and funds from the prior transaction.
- Does an agent owe fiduciary duties to people they meet at an open house?
- Generally no, unless those individuals sign a buyer representation agreement with the agent. Visitors at open houses are typically customers of the listing brokerage, not clients. The listing agent represents the seller and owes fiduciary duties only to the seller. The agent must still be honest with visitors, disclose material defects they know about, and not deceive — but they're not the visitors' advocate, and they're not obligated to negotiate in the visitor's interest. If a visitor wants someone to represent their interests, they should sign a buyer representation agreement with their own agent.
Bottom Line
The six fiduciary duties — OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accountability, Reasonable Care — define how Texas real estate agents must act toward their clients. These duties apply only to clients with signed representation agreements, not to customers (walk-in buyers, non-represented parties at showings). Texas's intermediary structure modifies standard duties when a brokerage represents both buyer and seller in the same transaction. The most-tested concepts on the TREC exam are: distinguishing client from customer, recognizing duty violations in scenarios, refusing unlawful client instructions, and understanding when confidentiality must yield to material-fact disclosure. For more on Texas-specific agency rules, see our guides on Texas intermediary vs dual agency, TREC promulgated forms, and the broader Texas Real Estate Exam guide including the exam blueprint and passing score breakdown.
Source: Texas Real Estate Commission (TREC) · TREC Rules and Statutes · Texas Occupations Code Chapter 1101 (Real Estate Brokers and Sales Agents)