REALTORS® work under a strict Code of Ethics. One provision of this Code requires REALTORS® to seek written acknowledgement, both from home buyers and home sellers, stating that they understand the agency relationship. An agency relationship is created where one person, known as the principal, asks another person, known as the agent, to act on their behalf. In a real estate transaction, an agency relationship is formed between the principal and the brokerage firm (including all of its licensees) through the services of a REALTOR®.
Agency Disclosure
Seller's Agent
Purchaser's Agent
Dual Agent
The "relationship" between a REALTOR® and a Buyer or Seller
REALTORS® are governed by the legal concept of "agency". An agent (REALTOR®) is legally obligated to look after the best interest of the person he or she is working for. They must be loyal to that person.
A REALTOR® may be your agent - if you have clearly established an agency relationship with that REALTOR®. Unfortunately, all too often in the past we may have assumed an obligation exist when it did not.
Agency Disclosure
Simply put, a consumer (buyer/seller) of real estate brokerage services can be:
a. a "customer", in which case he/she is representing him/herself in the transaction, or
b. a "client", in which case the REALTOR® is representing his/her best interests in the transaction.
Before you do anything you need to consider or decide representation...
Client or Customer; which is best for you?
On January 1 st, 1995, Article 3 of the Canadian Real Estate Associations "REALTOR® Code of Ethics" became law for all Canadian REALTORS®:
"The member shall fully disclose in writing to, seek written acknowledgement of disclosure from, all parties to a transaction regarding the existence of a member's agency relationship and the nature of the service the member will be providing to the client versus the customer or other party to the transaction. The member shall also disclose to other members involved in the transaction whether the member is representing the vendor, the purchaser, or some other party to the transaction."
Similar wording is contained with the Real Estate Council of Ontario's Code of Ethics, on January 13 th, 1999.
In other words, a consumer of real estate brokerage can elect to be a 'Customer' or 'Client'.
A REALTOR® represents the interest of their client.
A Customer represents the interest of themselves.
Services available to Buyers: Customer vs. Client |
Service |
Customer |
Client |
1. Arrange property showings |
Yes |
Yes |
2. Assist with financing |
Yes |
Yes |
3. Provide accurate information |
Yes |
Yes |
4. Explain forms and agreements |
Yes |
Yes |
5. Give advice and counsel |
No |
Yes |
6. Keep bargaining positions confidential |
No |
Yes |
7. Negotiate best terms and price |
No |
Yes |
8. Disclose info., improve bargaining position |
No |
Yes |
9. Prepare an offer favourable to buyer |
No |
Yes |
10. Show unlisted properties |
No |
Yes |
Seller's Agent
When a real estate company is a "vendor's agent", it must do what is best for the vendor of a property.
A written contract, called a listing agreement, normally establishes vendor agency. It also explains services the company will provide, establishes a fee arrangement for the REALTORS® services and specifies what obligations a vendor may have.
A vendor's agent must tell the vendor anything known about a purchaser. For instance, if a vendor's agent knows a purchaser is willing to offer more for a property, that information must be shared with the vendor. Confidences a vendor shares with a vendor's agent must be kept confidential.
A purchaser can expect fair service and disclosure of pertinent information about a property. Nothing will be misrepresented about a property. All questions must be answered honestly.
Purchaser's Agent
A real estate company acting as a "purchaser's agent" must do what is best for the purchaser.
A written contract, called a buyer agency agreement, establishes purchaser agency. It also explains services the REALTOR® will provide, establishes a fee arrangement for the REALTORS® services and specifies what obligations a purchaser may have. Typically, purchasers will be obliged to work exclusively with that REALTOR® for a period of time.
A REALTOR® working for a purchaser will keep information about the purchaser confidential from the vendor but will treat the vendor fairly and honestly.
Dual Agent
Occasionally a real estate company will be the agent of both the purchaser and the vendor. The purchaser and vendor 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 purchaser and the vendor.
Since the company's loyalty is divided between the purchaser and the vendor who have conflicting interests, it is absolutely essential that a dual agency relationship be established in writing and specifically describes the rights and duties of everyone involved.
Dual Agent, secrets kept: Normally, a 'brokerage house' that represents the interest of the Seller and the Purchaser does not have to disclose any information to either party. Found often when one sales representative represents a buyer and a different sales representative represents a seller, both in the same brokerage.
Dual Agent, secrets not kept: Normally a 'brokerage house' that represents the interest of the Seller and the Purchaser discloses any and all information to either party. Found often when one sales representative represents a buyer and a different sales representative represents a seller, both in the same brokerage and when one sales representative is selling a property they have listed.
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