Are You a Client or a Customer?

*NOTE* This article will expire once the Trust in Real Estate Services Act, 2002 (TRESA) which is replacing the Real Estate and Business Brokers Act, 2002 (REBBA) comes into full effect. The Government has delayed the April 1, 2023, in-force date of the Phase 2 legislative changes to assess a proposal to further enhance consumer protection and offer more consumer choice. At this time, RECO does not have a new effective date.

The real estate industry sometimes uses language that appears at first glance to be clear, but do you as a consumer know what some terms really mean? At first glance, the words “Client” and “Customer” seem pretty clear-cut, but they mean completely different things to a REALTOR®. It also means a tremendous difference in how seriously you are taken as a Buyer. Think we’re splitting hairs? The words “Client” and “Customer” and the way they relate to the REALTOR® as individuals make a tremendous difference in the types and level of service you receive. After you read why, you’ll know absolutely whether you want to be one or the other.

First, let’s start with a little history. REALTORS® have always worked with home Sellers to list their homes for sale on the market. Along with this service comes the responsibility to advertise the homes, network with other REALTORS® to find a Buyer, negotiate the sales contract and guide the Sellers to successful closings. Because of the time and expenses incurred by the sales representative and broker which will not be reimbursed until the closing of the home, Sellers have always been required to sign a listing contract. This contract enables the sales representative/Broker enough time to properly market the property, find a Buyer, negotiate a contract and get the property to closing within the time frame allowed. It also protects the agent from home owners who wish to use services without fairly compensating the professional.

The real benefit, however, is for the home owner. Once the home owner has signed the contract, the sales representative/Broker has the fiduciary responsibility to get the highest price possible for the home and to protect the Seller’s interests above all else. The sales representative must also follow provincial and federal mandated regulations as to ethics and legalities that are enforceable by a provincial council in conjunction with the local Real Estate Association. In other words, the contract is legally binding with the REALTORS® performance at stake. Now that a contract has been signed, the home owner is a “Client” of the sales representative/Broker, and enjoys the full privileges of a close, working relationship.

Buyers have historically worked with REALTORS® too, but it wasn’t until fairly recently that they have been asked to sign “Buyer Representation Agreements”. This is a change that has come about because of two reasons…abuse to Buyer’s agents and increased consumer awareness. Without a contract the Buyer’s agent was particularly vulnerable to working without getting paid. Too often, Buyers would ask them to show them house after house, and then buy from another sales representative. One favorite Buyer trick is to attend open houses without their REALTOR® and tell the listing sales representative they aren’t working with anyone. Buyers mistakenly believe that they are learning about more homes without a sales rep. at their side, or that they may possibly get a better deal. The truth is…they don’t! They usually pay more for the home than they have to when they buy from the listing sales representative directly.

Then consumer awareness dawned. Buyers began to realize that whoever represented them at the closing table was on the side of the Seller, not theirs. They realized that they deserved to have a true advocate, and the Buyer’s Representative was born. The only way was to create a binding agreement that protected both parties. Good REALTORS® didn’t want to be burned again so the “Buyer Representation Agreement” was created. Again, it was a protection for the REALTOR®, but it generates much more benefit for the Buyer. The main advantage is that it releases the agent from a fiduciary responsibility to the Seller and enables the agent to pursue the Buyer’s goals without any agenda.

Once the contract is signed, the sales representative goes into motion searching the MLS® for homes, and seeking homes through other avenues – foreclosures, FSBO’s, and their own database. At negotiations, the contracted Buyer’s representative becomes a “bulldog for the Buyer”, unrestricted by the Seller or Seller’s agent. Now they can make more demands, get a better price and better terms of sale for the Buyer. Despite these advantages, some Buyers are still reluctant to sign. They don’t want to be “tied down” or they may mistakenly think that getting several REALTORS® to work with them will get them a better home or deal. They won’t. Part of the strength of the industry is the REALTOR® communication network. A Buyer working with several sales rep’s will quickly become a joke.

Without a contract, the Buyer is clearly not a “Client”. He/She is a “Customer” and when a good listing comes on the market either by word of mouth, e-mail from another REALTOR®, or on the MLS®, who do you think the Buyer’s agent will notify first…the uncommitted Buyer (Customer) or the contracted Buyer (Client?). A contract makes a difference in other ways. For example, there are things the Seller may not want disclosed to the Buyer such as their urgency to sell, which could compromise their bargaining position. A REALTOR® who then discloses this information is in ethical violation and can be brought before the Real Estate Council of Ontario (RECO) on charges. Some offenses are serious enough to have a REALTOR® license to practice suspended or revoked completely.

But the Buyer has no such protections without a contract! Anything they say to an un-contracted REALTOR® may be passed along to the Seller. Why? Because, any REALTOR® who works for the Buyer without a contract automatically becomes a sub-agent for the listing broker, and is therefore working on behalf of the Seller. Surprised? It’s all spelled out – in the listing contract and in the “Buyer Representation Agreement”. A contract makes the difference in whether you are a “Customer” or a “Client” in a real estate transaction. Which do you want to be?

If you are shopping for a home in the near future and would like Future Homes to represent you exclusively as a “Client” call us today, we will save you thousands of dollars! and a whole lot of hassle. Please remember this service provided through a “Buyer Representation Agreement” costs you absolutely nothing, our fee is paid by the seller of the property you purchase through Future Homes & Real Estate Ltd. Brokerage. Don’t settle to be just a “Customer” expect and get more, be a “Client” !