Realtors work within the Law of Agency
As of January 1st, 1995, the Ontario Real Estate Association required agents to disclose to everyone involved, who it is they represent.
The Way It Was
In the past, many buyers thought that agents helping them were working in their best interests. The law, however, states that their duty lies with their client. Until now, that was always the Vendor. A buyer could always expect competent service, but in most cases, both agents were “working for the Vendor”
Now.. The buyer has a choice as to how he/she is represented.
- The Agent is the Real Estate Company (the Broker) and all it’s salespeople
- The Client is the party who contracts for an Agent to act on behalf of that party and assist with their real estate transaction
- A customer is a person who receives services from another person’s agent, but they are not the Client of that person
Clear as mud?
Client.. Buyer Broker Situation.
This has become probably the most common situation now because a purchaser can hire an agent to work on their behalf to negotiate the best price and terms for them.
The buyer then becomes “their Client” and the agent must disclose any information that may affect their decisions.
The Sales Rep owes a fiduciary duty to that buyer.. confidentiality, disclosure, accountability etc. and will be able to give direct advice as to market activity, strategy etc.
The agent would work with the buyer to the fullest, making sure their interests are protected. This would include providing regular information on new listings, sales, and other pertinent information.
The best part is … There are no additional costs to hire an agent to represent you. (unless otherwise arranged). The buyer’s agent can be paid by the listing broker, as agreed upon in the listing agreement and MLS arrangements.
If the buyer chooses to be a client, then he/she must sign a Purchaser Agency Agreement with the agent, whereby the buyer agrees to work with that agent exclusively for a designated period of time.
If a buyer doesn’t choose this, then the agent is working for the Vendor, as before.
This can be a fairly lengthy topic, and this is just meant to be a very brief overview. Here are a few facts that may help you understand the relationships a little better:
REALTORS are governed by the legal concept of “ Agency.”
An agent is legally obligated to look after the best interests of the person he or she is working for. The agent must be loyal to that person.
A real estate company may be your agent – if you have clearly established an agency relationship with that REALTOR. But often, you may assume such an obligation exists when it does not.
REALTORS believe it is important that the people they work with understand when an agency relationship exists and when it does not – and understand what it means.
In real estate, there are different possible forms of agency relationship:
1 . Seller’s Agent
When a real estate company is a “seller’s agent,” it must do what is best for the seller of a property.
A written contract, called a listing agreement, establishes seller agency. It also explains services the company will provide, establishes a fee arrangement for the REALTOR’s services and specifies what obligations a seller may have.
A seller’s agent must tell the seller anything known about a buyer. For instance, if a seller’s agent knows a buyer is willing to offer more for a property, that information must be shared with the seller.
Confidences a seller shares with a seller’s agent must be kept confidential from potential buyers and others.
Although confidential information about the seller cannot be discussed, a buyer working with a seller’s agent can expect fair and honest service from the seller’s agent and disclosure of pertinent information about the property.
2. Buyer’s Agent
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 and specifies what obligations a buyer may have.
Typically, buyers will be obliged to work exclusively with that company for a period of time.
Confidences a buyer shares with the buyer’s agent must be kept confidential.
Although confidential information about the buyer cannot be disclosed, a seller working with a buyer’s agent can expect to be treated fairly and honestly.
3. Dual Agent
Occasionally a real estate company will be the agent of 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 the seller.
Since the company’s loyalty is divided between the buyer and the seller who have conflicting interests, it is absolutely essential that a dual agency relationship is 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.
Who’s working for you?
It is important that you understand who the REALTOR is working for. For example, both the seller and the buyer may have their own agent which means they each have a REALTOR who is working for them.
Or, some buyers choose to contact the seller’s agent directly. Under this arrangement, the REALTOR is working for the seller, and must do what is best for the seller, but may provide many valuable services to the buyer.
A REALTOR working with a buyer may even be a “sub-agent” of the seller. Under sub-agency, both the listing agent and the co-operating agent must do what is best for the seller even though the sub-agent may provide many valuable services to the buyer.
If the seller and the buyer have the same agent, this is dual agency and the REALTOR is working for both the seller and the buyer.
Code of Ethics
REALTORS believe it is important that the people they work with understand their agency relationship. That’s why agency disclosure is included in a self-imposed Code of Ethics, which is administered by the Real Estate Council of Ontario.
The Code requires REALTORS to disclose in writing the nature of the services they are providing and encourages REALTORS to obtain written acknowledgement of that disclosure. The Code also requires REALTORS to enter into a written agency agreement with any sellers or buyers they are representing.
For more detailed information, please contact us.