Real Estate Agency Law — The 6 Fiduciary Duties (COLDAC) Explained

When you sign a listing agreement or a buyer broker agreement, you're not just hiring somebody to open lockboxes. You're creating a legal relationship called agency, and the second that relationship exists, your agent owes you six duties that the courts take dead serious. Mess one up and your agent doesn't just lose a commission — they can lose their license, get sued for damages, and in some cases catch a federal violation stacked on top.

These six duties get drilled into every real estate exam in the country, usually under the acronym COLDAC: Care, Obedience, Loyalty, Disclosure, Accounting, Confidentiality. Some states teach it as OLDCAR or COALD, but the duties are the same. This post walks through each one, shows you what a breach looks like in the wild, and covers the agency relationships you need to know cold for the exam.

Client vs. Customer — The Distinction That Decides Who You Owe

Before COLDAC, you have to know who's on the other end of those duties. This is where new agents get burned and where exam writers love to set traps.

A client is the person the agent represents. The agent has a fiduciary relationship with the client and owes them all six COLDAC duties.

A customer is somebody the agent works with but does not represent. Think: a buyer who walks into an open house run by the listing agent. That buyer is a customer of the listing agent — the listing agent represents the seller. The agent still owes the customer honesty and fair dealing, and must disclose known material defects, but the agent does NOT owe the customer loyalty, confidentiality, or the rest of COLDAC.

Worked example: A buyer tells the listing agent at an open house, "We love it. We'll go up to $450,000 but we want to start at $420,000." If that buyer is a customer (not a client), the listing agent is legally required to take that information to the seller. The buyer just blew their own negotiation. That's why buyers should sign a buyer broker agreement before they start talking numbers.

C — Care

Care means your agent has to use reasonable skill, diligence, and competence. They're a professional. They need to know how to price a property, read a market, write a clean contract, hit deadlines, and recommend inspections, attorneys, and appraisers where appropriate.

Breach example: An agent lists a house at $600,000 because the seller wants it there, without pulling a single comparable sale. The house actually comps at $725,000. It sells in two days for $605,000. The seller later finds out and sues. That agent breached the duty of care by failing to do basic competent market analysis.

Care also covers paperwork. Missing the financing contingency deadline, failing to deliver the federally required Lead-Based Paint Disclosure for any home built before 1978, or blowing a TILA-RESPA Integrated Disclosure (TRID) timeline — those are care failures.

O — Obedience

The agent must follow the client's lawful instructions. The key word is lawful.

If a seller tells the agent "list it at $500,000 and don't drop the price for 60 days," the agent has to obey that. But if a seller tells the agent "don't show the property to anyone Hispanic," the agent must refuse. Following that instruction would violate the federal Fair Housing Act of 1968 (Title VIII of the Civil Rights Act of 1968), which prohibits discrimination based on race, color, religion, national origin, sex, disability, and familial status. There's no version of agency law that requires you to commit a federal crime for your client.

Breach example: Buyer tells their agent, "Submit my offer today before 5 p.m." The agent goes home, plans to send it tomorrow morning. Seller accepts a competing offer that night. That's a flat breach of obedience.

L — Loyalty

Loyalty means the agent puts the client's interests above everyone else's — above the agent's own, above the brokerage's, above the other side. No self-dealing. No undisclosed personal interest. No working both sides without consent.

Breach example: A listing agent has a buyer client looking at $400K homes. The agent's own seller has a $410K listing that's been sitting for 90 days. The agent steers their buyer hard toward that listing — not because it fits the buyer best, but because the agent collects both sides of the commission. That's a loyalty breach to the buyer and potentially an undisclosed dual agency violation.

This is also where RESPA comes in. The Real Estate Settlement Procedures Act of 1974 (12 U.S.C. §§ 2601–2617) makes it illegal for an agent to accept kickbacks or referral fees from title companies, lenders, inspectors, or other settlement service providers. If your agent is steering you to a title company because that company is slipping them $500 per closing, that's both a loyalty breach and a federal violation that can carry fines and up to a year in prison.

The Sherman Antitrust Act of 1890 (15 U.S.C. §§ 1–7) layers on top of that — "blanket" referral fee agreements between brokerages are illegal restraints of trade. Agents can split commissions for actual work performed in a brokerage capacity; they cannot pay each other to send warm leads sight unseen.

D — Disclosure

The agent must disclose to their client every material fact they know that could affect the client's decision. Material means it matters: price, terms, the existence of other offers, the buyer's motivation, the property's defects, conflicts of interest, the agent's relationship to the other side.

This is also where federal disclosure law plugs in:

• Residential Lead-Based Paint Hazard Reduction Act of 1992 is required on any residential sale of property built before 1978. The seller must disclose known lead hazards; the buyer gets a 10-day inspection window.
• Truth in Lending Act (15 U.S.C. § 1601 et seq.) — implemented through Regulation Z (12 CFR Part 1026) — requires lenders to disclose APR, finance charges, and total cost of credit through the Loan Estimate and Closing Disclosure. Buyers get a 3-business-day right of rescission on refinances secured by a principal dwelling. That right can extend up to three years if required disclosures weren't delivered.
• RESPA disclosures — Loan Estimate, Closing Disclosure, Special Information Booklet — must be delivered on schedule. The Good Faith Estimate must go out no later than three business days after a lender receives an application.

Breach example: A listing agent knows the basement floods every spring. The seller hasn't been there in two years and forgot to mention it. The agent stays silent. Buyer closes, basement floods in April, buyer sues. The agent's duty of disclosure (to the client) plus the duty of honesty (to the customer) means hiding a known material defect is malpractice in any state.

Important distinction: disclosure runs to the client on material facts about the deal, but agents also owe honesty and fair dealing to customers. They cannot lie to the other side and they cannot conceal known material defects from anyone.

A — Accounting

The agent must account for every dollar and document that passes through their hands on behalf of the client. Earnest money, deposits, keys, contracts, disclosures — all tracked, all in writing, all delivered.

The big practical piece here is the trust account (sometimes called escrow account or earnest money account). Client funds go into a designated trust account, separate from the brokerage's operating account. Commingling — mixing client money with brokerage money — is one of the fastest ways for a broker to lose their license in every state. Conversion — using client money for your own purposes — is a felony.

Breach example: Buyer's $10,000 earnest money sits in the listing brokerage's trust account. The broker is short on rent and "borrows" $3,000 from the trust account, planning to put it back next week. That's commingling at minimum, conversion if the funds sit. License gone, possible criminal charge.

Accounting also covers paperwork delivery. The agent has to deliver copies of every signed document to the client promptly — not "I'll get it to you next week" — usually defined by state statute as within 24 to 72 hours.

C — Confidentiality

The agent cannot disclose confidential information about the client to the other side or to anyone else without permission. And here's the kicker that trips up exam-takers: confidentiality survives the end of the agency relationship. Forever. The deal closes, the listing expires, the buyer walks — doesn't matter. Whatever your client told you in confidence stays in confidence.

What's confidential? The client's motivation, financial situation, willingness to accept different terms, personal reasons for selling or buying, anything that would weaken their negotiating position.

What's NOT confidential? Material defects in the property and any legally required disclosures. You can't hide behind confidentiality to cover up a leaky roof.

Breach example: Seller's listing agent, at an open house, mentions to a visiting buyer's agent that "the sellers are getting divorced and they need to move fast." The buyers come in $40,000 under list. That single sentence cost the sellers real money, and it's a clean confidentiality breach.

The Tension: Disclosure vs. Confidentiality

This is the favorite exam trick. Disclosure says "tell your client everything material." Confidentiality says "don't tell anyone else confidential client info." They don't actually conflict — they cover different directions. Disclosure runs to the client. Confidentiality runs from the client outward. Memorize that and you'll never miss the question.

Types of Agency Relationships

Single Agency

One agent represents one party in the transaction. Listing agent represents seller only. Buyer's agent represents buyer only. Cleanest setup. Full COLDAC owed to one side only.

Sub-Agency

The listing brokerage's offer of compensation to a cooperating brokerage can, in some states and arrangements, create a sub-agency relationship where the cooperating agent owes fiduciary duties to the seller, not the buyer they're driving around. Sub-agency was the default in the MLS world for decades and is mostly gone now because it was confusing and dangerous for buyers who didn't realize their "agent" actually worked for the other side. Most modern transactions use buyer agency or transaction brokerage instead.

Dual Agency (Disclosed Dual Agency)

One agent — or one brokerage — represents both buyer and seller in the same transaction. This is legal in most states but only with written, informed consent from both parties before the agency relationship begins. Undisclosed dual agency is illegal everywhere and grounds for license revocation.

The problem with dual agency is mathematical: you can't owe full loyalty to two parties whose interests are opposed. So in disclosed dual agency, the agent's duties are limited. They typically can't advocate price for either side, can't share one party's confidential info with the other, and have to stay neutral.

A handful of states ban dual agency entirely and use transaction brokerage instead, where the agent is a neutral facilitator owing limited duties to both sides without representing either.

Designated Agency

The brokerage represents both parties, but assigns one agent to represent the buyer and a different agent to represent the seller. Each agent owes full fiduciary duties to their assigned party. The designated broker manages the firewall between them. This is the modern compromise — gets you full single agency at the agent level without the dual agency mess.

Listing Agreements vs. Buyer Broker Agreements

The agency relationship is created by a written agreement (in most states — some allow oral, but practically nobody runs business that way).

A listing agreement is between the seller and the listing broker. The three main types you need for the exam:

• Exclusive Right to Sell — broker gets the commission no matter who finds the buyer, even if the seller finds them. This is the default in most markets.
• Exclusive Agency — broker gets the commission unless the seller finds the buyer independently, in which case no commission is owed.
• Open Listing — non-exclusive; whoever brings the buyer earns the commission. Mostly used in commercial.

A buyer broker agreement (also called a buyer representation agreement) is between the buyer and the brokerage representing them. It locks in who's working for whom, what the buyer owes the broker, the term, and how commissions are paid. After the NAR settlement reshaped commission practices, written buyer broker agreements before showings became a near-universal requirement on MLS-listed properties.

Federal Law Wrapped Around Every Transaction

State agency law creates COLDAC. Federal law puts walls around the whole transaction. You need to know all of these for the exam:

• Fair Housing Act (1968) — no discrimination in housing on the basis of race, color, religion, national origin, sex, disability, or familial status. HUD enforces. Includes refusals to sell or rent, plus steering, blockbusting, and discriminatory advertising. Disability and familial status were added in 1988.
• Americans with Disabilities Act (1990) — public accommodations (commercial real estate, brokerage offices) must be accessible.
• Equal Credit Opportunity Act (1974, 15 U.S.C. § 1691) — no discrimination in credit on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. The Seventh Circuit's 2024 Townstone ruling confirmed ECOA also protects prospective applicants who are discouraged from applying.
• RESPA (1974) — bans kickbacks and referral fees among settlement service providers; mandates standardized disclosures and escrow rules.
• TILA (1968) — mandates APR and total-cost-of-credit disclosures through Regulation Z.
• Sherman Antitrust Act (1890) — bans price-fixing of commissions among competing brokerages and bans blanket referral fee arrangements.
• Residential Lead-Based Paint Hazard Reduction Act (1992) — mandatory disclosure for pre-1978 housing.

An agent who follows COLDAC perfectly but ignores federal law is still going to lose their license and possibly face federal charges. Both bodies of law have to work together every day on every deal.

How COLDAC Shows Up on the Exam

Three things to remember:

1. The exam loves the client vs. customer distinction. Most COLDAC trap questions hinge on whether the person in the scenario is the agent's client or just a customer.
2. Confidentiality survives termination of the agency relationship forever. This is almost guaranteed to be a question.
3. In a dual agency scenario, the agent's duties are limited — they can't fully advocate for either side. If a question describes a dual agent doing strong price advocacy for one party, that's the wrong answer.

A solid mnemonic walkthrough: imagine you hire somebody to handle one of the biggest financial decisions of your life. You'd expect them to be competent (Care), to do what you tell them (Obedience), to put you first (Loyalty), to tell you everything you need to know (Disclosure), to handle your money cleanly (Accounting), and to not run their mouth (Confidentiality). That's COLDAC.

Ready for the Exam?

Agency law is one of the heaviest-weighted sections on the national portion of every state's real estate exam, and COLDAC alone usually generates four to eight questions. Combined with federal law overlays — RESPA, TILA, Fair Housing, ECOA, Sherman — you're looking at roughly a quarter of your test.

If you want every fiduciary duty, every federal statute, every agency type, and every exam shortcut in one place, grab the National Real Estate Master Guide at studystack.org. It walks you through COLDAC, every federal law that touches real estate, every contract type, every math formula, and 1,000+ practice questions modeled after the actual state and national exams. Pass the first time. Get to work.