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Agency Relationship

When you are working with a professional real estate agent, it is imperative that you have a full understanding of who the real estate agent works for, and what are the legal obligations of the real estate agent. The Canadian Real Estate Association (CREA) has a formal legal requirement for all real estate agent to disclose their agency relationship to any client at the beginning of their business dealings.

A purchaser can engage a real estate agent in one of two relationships:

1) The Client Relationship (Agent Works For Buyer): A real estate company engaged as a "Buyer's Agent" must perform its duties in the best interests of the client. A formal written agreement known as a Buyer Agency Agreement, establishes the terms and conditions of this business relationship. This agreement also describes the variety and extent of services that the company will be responsible for, sets the structure whereby the fees will be payable to the real estate agent, and outlines the obligations which the buyer may be facing. Under the terms of this agreement, the buyer has an obligation to have that company represent their real estate interests for a specific period of time. The real estate agent must provide professional advisory services, act as a negotiator in good faith to represent the buyer's interests to the best of their capacity, and to present the buyer with as much information as necessary in order to make an informed and proper set of decisions.


2) The Customer Relationship (Agent Works For Seller): The buyer must expect to receive honest and equitable treatment under the terms of this business relationship. It is imperative that the buyer comprehends that under the terms of such an agreement, the real estate agent is acting as an agent of the seller and therefore is responsible to that party first and foremost. Regardless, the buyer has a full expectation that the real estate agent will reveal and present all relevant information with regards to a property, free of misrepresentation or concealment, and to answer the buyer's questions about the property in complete and verifiable honesty. When a buyer enters into this form of an agreement with a real estate agent it is understood by all parties that the real estate agent will not attempt to negotiate a price for the property in any form of representative capacity or responsibility to the buyer, as that would represent a conflict of interest with the real estate agent's primary relationship with the seller.


There is a significant difference in the extent and type of services provided by a real estate agent in the Client vs. the Customer relationship. It is important for the buyer to understand that there is no difference in the cost between these two types of services.

Client vs. Customer

Client

Loyalty To You: The real estate agent is your exclusive representative and thus acts only in your best interest.

Responsibility: The real estate agent has a responsibility to advise you of all of the pertinent details with regards to a real estate transaction and to fully obey and carry out your instructions within the scope of authority granted by the buyer.

Due Care & Diligence: The real estate agent is responsible for exercising their professional skills to protect the buyer from any harm and risks that are reasonably foreseeable, and to recommend the professional services of other experts when the requirements of the buyer exceed the scope of their expertise.

Confidentiality: The real estate agent agrees to withhold any critical personal information about the buyer unless fully authorized to do so.

Complete Disclosure: The real estate agent must disclose the full extent of information with regards to the real estate transaction which has any foreseeable impact on the best interests of the buyer.

Proper Accounting: The real estate agent must account in full for all funds or assets deposited with them and held on behalf of the buyer.

Total Advocacy: The real estate agent must act as the advocate of the buyer, representing their interests and benefits.

Provision Of Information: The real estate agent must inform the buyer of any properties which are known to be available with no regard to the commission or fees payable.

Pricing: The real estate agent can not misrepresent or obfuscate in any way the market value or the expected purchase price of any property to the buyer.

Customer

Honesty: The real estate agent must not misrepresent any information

Fairness: The real estate agent must clearly explain the differences between the client relationship and the customer relationship.

Accounting: The real estate agent must be responsible for any funds or assets deposited with them and held on behalf of the buyer.

Reasonable Care: The real estate agent must act only within the restrictions of the law with regards to all real estate transactions.

The Relationship Of Sellers To Real Estate Agents

A real estate company must perform its duties to advance the best interests of a seller of property which has contracted with them for representation. A formal agreement known as a Listing Agreement determines the parameters of the agency granted by the seller. This agreement also outlines the variety of services which will be provided by the real estate agent, the arrangement for the payment of fees and commissions, and the extent of the obligations on behalf of the seller.

The seller must be aware that any information which is shared confidentially with a real estate agent will be kept strictly confidential in perpetuity and not divulged in any way to buyers and other parties. The real estate agent must keep the seller fully informed on any information they have which pertains to the real estate transaction, including the knowledge of any strategies or "price ceilings" a buyer is prepared to present.

The seller has to remain confident that a real estate agent who is contracted as their sub-agent has the best interests of the seller in mind first and foremost, in the same way that a buyer has to remain confident that a real estate agent who is contracted as their sub-agent has the best interests of the buyer in mind first and foremost. When a real estate agent is working as a Buyer's Agent it is understood that they may still be compensated directly from the seller under the agreement in place with the specific Listing Agent.

Dual Agency

In some cases, a single real estate agent or company will act as the agent for the seller and the buyer. It is important to note that this arrangement cannot be executed without the formal approval of both the seller and the buyer and duly noted in the Listing Agency Agreement and the Buyer Agency Agreement. In the cases of Dual Agency, the real estate agent or company is responsible to represent the best interest of both the seller and the buyer.

Due to the fact that this arrangement represents a fundamental conflict of interest, a document must be drafted to cover the precise responsibilities and duties of all involved parties in a Dual Agency Agreement. This form of agreement indicates what each party is responsible for, and what the limitations of those responsibilities entail.

Not intended to solicit agency of any kind.

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Canadian Mortgages
Office: 905-277-0771       Mobile: 416-854-5060      Fax: 1888-682-4698    
Office Address 102-50 Burnhampthorpe Rd.W., Mississauga, Ontario L5B3C2