This section is from the book "Practical Real Estate Methods For Broker, Operator & Owner", by Thirty Experts. Also available from Amazon: Practical Real Estate Methods for Broker, Operator, Owner.
The principal has the right to demand from the broker his best efforts, and that he should be faithful and true to his employer, and exert every possible means and make the best possible efforts to serve his principal most advantageously. The relationship of principal and broker is one of trust and confidence, and from such relationship spring the rules governing the conduct of persons standing in similar positions. If an attorney is employed by a client in any litigation or other business, it is expected that he protect his client, and any betrayal of his trust is visited with the severest punishment. So, in every other employment, the employee, if he desires to succeed, owes his allegiance to his employer. If I employ a broker and pay him for his service, I am entitled to the benefit of his knowledge, experience and any information he procures or possesses. It is his duty to sell my property for the very highest price he can procure. If the broker has any knowledge or information that a particular parcel owned by me is desired for a particular purpose, it is his duty to impart that information to me. If, for instance, a railroad company needs a large tract of land for the purpose of a station or other improvement, and the broker knows that the company has or is about to purchase adjoining property, if he expects to be paid by me for selling my property, it is his duty to impart that information. An agent is held to the utmost good faith in his dealings with his principal. If he acts adversely to his employer in any part of the transaction, or omits to disclose any interest which would naturally influence his conduct in dealing with the subject of the employment, it is such a fraud upon his principal as forfeits any right to compensation for his services. - Murray vs. Beard, 102 N. Y., 505.
If an agent acts adversely to his employer in any part of the transaction, or omits to disclose any interest which would naturally influence his conduct in dealing with the subject of the employment, it amounts to such a fraud upon the principal as to forfeit any right to compensation for services. It is an elementary principle that an agent cannot take upon himself incompatible duties or act in a transaction in which he has adverse interest or employment. In such a case he must necessarily be unfaithful to one or the other, as the duties which he owes his respective principal are conflicting and incapable of faithful performance by the same person. If he is the owner himself or has an interest in the property which he offers he cannot claim any compensation. And if he is in reality the purchaser, although the transaction is done through a third person, the owner, upon obtaining the truth, may rescind, and the broker forfeits all compensation. In one case a lady acquired title to certain premises at a foreclosure sale. She entrusted a broker who had done business for her to collect the rents, and at the same time authorized him to sell the premises. Offers had been made for the property, which the broker advised her to decline. After a while the broker informed her that one Jones would purchase the property for $10,000, and the broker urged her to accept this offer; she finally consented to make the sale and entered into a written contract with Jones, whereby she agreed to sell for $10,000. The deed was taken in the name of the broker instead of Jones, and a mortgage was executed by the broker and retained by him to be placed on record. The owner claimed that she was cheated, that she did not know she was selling the property to the broker, but supposed that Jones was the grantee. She brought an action to rescind the sale and the deed was set aside. - Clark vs. Bird, 66 App. Div., 284.