WORKING WITH A REALTOR®

The Agency Relationship

REALTORS® are governed by the legal concept of “Agency”.  A REALTOR® is legally obligated to look after the best interests of the person he or she is working for.  The REALTOR® must be loyal to that person. A real estate company may be your REALTOR® – 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. When working with a REALTOR®, it is important to understand who the REALTOR® works for.  To whom is the REALTOR® legally obligated? In real estate, there are different possible forms of agency relationship:

  1. Seller’s Agent
    • When a real estate brokerage 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 brokerage 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 brokerage acting as a “Buyer’s Agent” must do what is best for the Buyer.
    • A written contract called a “Buyer Representation Agreement” establishes Buyer Agency.  It also explains services the brokerage 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 brokerage 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 brokerage 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 agreements.  Under this “Dual Agency” arrangement, the brokerage must do what is best for both the Buyer and the Seller.
    • Since the brokerage’s loyalty is divided between the Buyer and the Seller who have conflicting interests, 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.
  4. Customer Service
    • A real estate brokerage may provide service to Buyers and Sellers without creating buyer or seller agency. This is called “Customer Service”
    • Under this arrangement, the brokerage can provide many valuable services in a fair and honest manner. This relationship can be set out in a Buyer or Seller Customer Service Agreement.

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 a “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 “ONTARIO REGULATION 580/05” made under the REAL ESTATE AND BUSINESS BROKERS ACT, 2002 (REBBA 2002) came into effect on March 31, 2006. All licensed REALTORS®  in Canada are mandated by the following Regulations of the Act by way of the Code of Ethics regarding Representation Agreements namely Sections 10 through 17 as outlined herein.