Agency Relationships
What are the Agency Relationships?
When working with a REALTOR, it is important to understand who the REALTOR works for, and to whom is the REALTOR legally obligated. The Canadian Real Estate Association (CREA) requires REALTORS to disclose Agency Relationship to a potential client at the earliest time possible.
Buyer's Relationship to Realtors
A Buyer has a choice of two relationships with a REALTOR.
As a Client, a real estate company acting as a “Buyer’s Agent” must do what is best for the buyer. A written contract, called a Buyer Agency Agreement, establishes buyer agency. It also explains services the company will provide, establishes a fee arrangement for the REALTOR’s services (if applicable) and specifies what obligations a buyer may have. Under such agency, a buyer will be obliged to work with that company for a period of time. In return, confidence a buyer shares with that company will be kept confidential. The REALTOR is also required to offer professional advice, negotiate the best price for the buyer and provide the buyer with as much information required to make the right decision.
As a Customer the buyer can expect to be treated fairly and honestly. It is important for the buyer to realize that under such a relationship the REALTOR is technically a sub-agent of the seller so that duties are owed to that seller. However, the buyer can expect the REALTOR to disclose all pertinent information about a property, not to misrepresent any facts, and to honestly answer all questions about the property. Under such relationship with the buyer, the REALTOR must not imply that they shall negotiate a price for the buyer as that would be a direct conflict with the REALTOR’s sub-agency relationship with the seller and a violation of our rules and regulations.
Seller's Relationship to Realtors
A real estate company must do what is best for the seller of a property. A written contract, called a Listing Agreement, establishes seller’s agency. It also explains services the company will provide, establishes a fee arrangement for the REALTOR’s services and specifies what obligations a seller must have.
Confidence a seller shares with their REALTOR must be kept confidential from potential buyers and others. That REALTOR must tell the seller anything known about the buyer. For instance, if the REALTOR knows that a buyer is willing to offer more for a property, that information must be shared with the seller.
A seller must understand that a REALTOR working with a buyer as a sub-agent is ultimately working with the seller’s best interest in mind. A REALTOR working with a buyer, as a Buyer Agent, is working for the buyer’s best interest mind, but may still be compensated by the seller through provisions made to the Listing Agent.
Dual Agent
Occasionally a real estate company will be the agent for both the buyer and the seller. The buyer and seller must consent to this arrangement in their listing and buyer agency agreements. Under this “dual agency” arrangement, the company must do what is best for both the buyer and seller.
Since the company’s loyalty is divided between the buyer and seller who have conflicting interest, it is absolutely essential that a dual agency relationship be established in a written agency agreement. This agreement specifically describes the rights and duties of everyone involved and any limitations to those rights and duties.
Under the new TRESA legislation dual agency will be permitted provided there is “informed consent”. Also, it should be noted that dual agency in Ontario is referred to as “multiple representation”. Designated Agency will be authorized. That gets around the technical multiple representation situation.
Representation:
This bulletin explains brokerage representation, designated representation, multiple representation under both forms of representation, and the duties of brokerages, designated representatives, and real estate agents.
Summary:
Two forms of representation are permitted. Clients and brokerages may enter into a brokerage representation agreement or a designated representation agreement. Both agreements are with the brokerage. Which form of representation agreement an agent is permitted to use is a decision made by the brokerage. Agents are expected to follow their brokerage’s policies.
Brokerage representation
Under a brokerage representation agreement, the brokerage and all its agents are bound by the same duties to the client, including representing the best interests of the brokerage’s client. Any alteration of the brokerage’s duties would apply to all agents within the brokerage.
Designated representation
Under a designated representation agreement, the designated representative identified in the agreement is responsible for representing the best interests of the client. The brokerage, and other agents employed by the brokerage, must treat the client in an objective and impartial manner.
Multiple representation
Under brokerage representation, multiple representation arises in the following two circumstances:
• The brokerage has a seller client and one or more buyer clients in the same trade.
• The brokerage represents more than one competing buyer in the same trade, even if the property is listed by a different brokerage.
Under designated representation, multiple representation arises in the following two circumstances:
• The same agent is the designated representative for a seller client and a buyer client in the same trade.
• The same agent is the designated representative for more than one competing buyer in the same trade, even if the property is listed by a different brokerage.
