The Difference Between a Functionary Agent and a Fiduciary Realtor

Every now and then I wander into some online Realtor Forums to share and trade ideas, see how markets are doing in other places, and see if I can answer questions or learn something new. The most disturbing thing I come across regularly is the misguided mindset of so many Realtors about their role as an agent. Most recently, this came up again around the issue of real estate inspections and whether or not we as agents should recommend specific inspectors to our buyers.

One agent posted “I offer them the Yellow Pages or to use a recommendation from a friend” to find an inspector. God help us all.

Why would a professional real estate agent hold this lame position? First, her Broker’s attorney may insist upon it. It’s a risk avoidance issue. Agents accept greater risk when we put ourselves on the line with specific recommendations for inspectors, lenders, vendors, etc. I understand that viewpoint, but I think it’s a copout. What it says is that the agent is more important than the client. That it’s more important for the agent to protect herself legally than to provide better than mediocre service. Whose interest is being served by that, and what does it say about the agent who follows this approach? It says that you the client are not very important.

Sylvia and I do recommend specific inspectors to our buyers, and we absolutely DON’T want our buyers randomly picking inspectors from the Yellow Pages. I also attend the inspection and estimate the repair costs of items noted on the inspection report. I then advise and educate the buyer about which items are normal and expected versus items for which we should seek remedy or cost offsets from the seller.

In other words, I’m in it up to my elbows with the buyer during the inspection process. What am I supposed to do – hide out in a coffee shop during the inspection and tell my buyer to call around for some bids if he wants to know how much a new water heater and a roof repair will cost?

Most competent real estate attorneys will tell me I shouldn’t be this involved. But I think the risk and liability in mine and Sylvia’s transactions is reduced by our greater involvement, not the other way around. So I don’t listen to the attorneys because I have no desire to be a “do nothing” Realtor who avoids questions and doesn’t provide information for fear of being sued. I instead choose to provide a high level of service to our clients. I choose to be a “Fiduciary” instead of a “Functionary”.

This difference between a Fiduciary and a Functionary is spelled out on pages 96 and 97 of The Millionaire Real Estate Agent book.

The chart below outlines the differences.


The Difference Between a Functionary and a Fiduciary
Low Level High Level
Low Relationship High Relationship
Assumes Little Responsibility Accepts High Responsibility
Uses Low Skill Masters High Skill
Records Information Perceives Information
Responds to Needs Anticipates Needs
Processes Data Interprets Data
Narrow Picture Viewpoint Big Picture Viewpoint
Delivers Information Advises and Consults
Other-Directed Self-Directed
Minimum Legal Responsibility Maximum Legal Responsibility
Employee Partner
Does the Task Owns the Result
Tells and Sells Educates and Guides
Stays out of Decision Making Involved in Decision-Making
Follows Rules and Procedures Uses Judgment and Intuition
Replaceable Irreplaceable
Minimally Paid   Highly Paid  

Who would you rather have working for you. A low skill, narrow focused dolt who is so unsure of himself and those he recommends that he won’t even provide a reference for an inspector? Or would you prefer an experienced agent who operates on a higher level? Before you hire one, try to determine which they might be.

The book also notes:

“For the very best real estate agents there is a level of service they provide that goes beyond their purpose and value proposition. It is the commitment they make to the buyer and seller to act as a true fiduciary – to place their client’s interests ahead of the interests of all others. Even their own. …

Interestingly enough, a fiduciary can easily do functionary work, but a functionary cannot easily do fiduciary work. Top agents understand this and, as a result, work really hard to provide fiduciary services to all their buyers and sellers”.

Every real estate client deserves, and should demand, the highest level of service not only from Realtors but from everyone with whom you do business. We demand this of our vendors, on behalf of our clients, and we’re not bashful about what we want and expect. If they don’t deliver, they are removed from the list of people we use and recommend. One strike and you’re out. If you screw something up for our client, you better fix immediately without any flack or arm twisting, or we’ll fix the problem ourselves and you’ll receive no further referrals from the Crossland Team.

So, when we tell a buyer that we have some very good inspectors who will do a great job for them, we mean it and we stand behind it. When we send a buyer to a specific lender, that lender better perform, or they are off the Crossland Team vendor list. When our virtual tour guy says the tour will be ready by Friday, and we’ve told our seller we’ll have the listing up on Friday, that virtual tour better be ready, or we’ll be looking for another company to use. Same with home stagers, plumbers, carpet cleaners, painters, etc.

Should we demand anything less? Should you demand anything less?

We expect a Fiduciary level of service from everyone we do business with. We can’t function at a high level for our clients unless we surround ourselves by other fiduciary-minded people who are willing to be held accountable to a higher standard that the industry norm.

When you hire an accountant, do you want one who just plugs your numbers into Turbo Tax and prints out your tax return a few days later? Or do you want a fiduciary-minded accountant who will ask a lot of questions, dig around in your numbers, and look for ways to reduce your tax liability?

When you visit your doctor, do you want one who comes in to say hello for a few minutes before he leaves you to the nurses and heads to the next patient? Or do you want one who asks a lot of questions about how you’re doing, your lifestyle, exercise, eating habits, your kids, etc?

Ladies (and maybe some men), when you get your hair done, do you want your stylist to just go through the motions and give you a standard cut? Or do you want her to really look at your face, your complexion, skin tone and color, ask what you do for a living, and make suggestions about the style and cut that will compliment you most?

And when you ask your Realtor for the name of a good inspector, do you want to be directed to the Yellow Pages and told to ask your friends for a referral? Or do you want the name and number of one or more good inspectors with whom your Realtor has positive past experiences and stands behind 100%?

4 thoughts on “The Difference Between a Functionary Agent and a Fiduciary Realtor”

  1. Call me a control freak, but, the more that my husband and I can control in the entire transaction, whether it be lender, home inspector, title company, anything…we want to exert our control. That is the best way to make sure we not only make it to settlement, but we arrive without drama and with satisfied clients. Satisfied clients refer you. Worn-out-from-the-drama clients don’t.

  2. You shouldn’t recommend an inspector because of the perceived conflict of interest. What if it’s your buddy who makes sure the problems in the house are never known so you can close the sale?

    Contractors and estimates are different. I would give buyers several names I’ve worked with before and insist they also ask their friends and interview all those inspectors. Just telling them about one and making strong recommendation is not very responsible.

  3. Hi Jim,

    > What if it’s your buddy who makes sure the problems in the house are never known so you can close the sale?

    We don’t refer our “buddies”. If a client is that distrustful, we can’t effectively help them because our way of helping people assumes they trust us and know that EVERYTHING we do is done in their best interest.

    Should people trust every Realtor? No. This is where the ability of the consumer to evaluate and hire a Realtor is important. Most, according to NAR surveys, simply hire the first one to return an email or phone call. That’s not a good predictor of a Realtor’s skill and trustworthiness, and it’s a poor way to choose a Realtor.

    Karen, I’m with you on the drama aspect. Much more drama resulting from confusion and unexpected problems exists when we’re dealing with players we don’t know or trust.

    More importantly, our trusted vendors fix screwups immediately without effort on our part. Most recently, one of our lenders failed to inform us that not all of the seller paid closing costs could be used up at closing by our buyer. This caused our buyer to need $500 additional at closing than they had budgeted.

    Sylvia made one phone call to the lender and said “you need to make this right”. The lender said “I know, and I will”. And the lender showed up at closing with a check for $500, as rebate of some of the fees. Problem solved.

    We don’t have that kind of leverage with a lender the buyer finds through the internet., which is why we want our buyers to use our lenders, so we can make sure they don’t get screwed by some faceless out of state internet lender, as has happened.



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