The document reproduced below is entitled “Working with a REALTOR®”.
It offers an explanation of agency and customer service. It was drafted by the Ontario Real Estate Association and it appears on its websites and material. The Toronto Real Estate Board has its own version. After 14 months in use, it changed the reference to “frayed nerves” to “Offer negotiations may become stressful..”. That seems to be a little better and somewhat more professional in presentation.
This document replaces the prior explanation which was in common usage sine 31 March 2002 when the most recent changes to the Real Estate and Business Brokers Act, 2002, were enacted.
So, here’s the document without any further comment. Hopefully, you will know and understand whatever you need to know, in order to make an informed decision and select:
- Client services,
- Customer services, or
- Other options.
Working with a REALTOR®
The REALTOR® Consumer Relationship
In Ontario, the real estate profession is governed by the Real Estate and
Business Brokers Act, 2002, and Associated Regulations (REBBA 2002 or
Act), administered by the Real Estate Council of Ontario (RECO). All Ontario REALTORS® are registered under the Act and governed by its provisions.
REBBA 2002 is consumer protection legislation, regulating the conduct of
real estate brokerages and their salespeople/brokers. The Act provides
consumer protection in the form of deposit insurance and requires every
salesperson/broker to carry errors & omission (E&O) insurance.
When you choose to use the services of a REALTOR®, it is important to
understand that this individual works on behalf of a real estate brokerage,
usually a company. The brokerage is operated by a Broker of Record, who
has the ultimate responsibility for the employees registered with the
brokerage. When you sign a contract, it is with the brokerage, not with the
salesperson/broker employee.
The Act also requires that the brokerage (usually through its REALTORS®)
explain the types of service alternatives available to consumers and the
services the brokerage will be providing. The brokerage must document the
relationship being created between the brokerage and the consumer, and
submit it to the consumer for his/her approval and signature. The most
common relationships are “client” and “customer”, but other options may be
available in the marketplace.
Client
A “client” relationship creates the highest form of obligation for a REALTOR® to a consumer. The brokerage and its salespeople/brokers have a fiduciary (legal) relationship with the client and represent the interests of the client in a real estate transaction.
The REALTOR® will establish this relationship with the use of a representation agreement, called a Listing Agreement with the seller and a Buyer Representation Agreement with the buyer.
The agreement contains an explanation of the services the brokerage will be providing, the fee arrangement for those services, the obligations the client will have under the agreement, and the expiry date of the agreement. Ensure that you have read and fully understand any such agreement before you sign the document.
Once a brokerage and a consumer enter into a client relationship, the
brokerage must protect the interests of the client and do what is best for the
client. A brokerage must strive for the benefit of the client and must not
disclose a client’s confidential information to others.
Under the Act, the brokerage must also make reasonable efforts to determine any material facts relating to the transaction that would be of interest to the client and must inform the client of those facts. Although they are representing the interests of their client, they must still treat all parties to the transaction with fairness, honesty, and integrity.
Customer
A buyer or seller may not wish to be under contract as a client with the
brokerage but would rather be treated as a customer. A REALTOR® is
obligated to treat every person in a real estate transaction with honesty,
fairness, and integrity, but unlike a client, provides a customer with a
restricted level of service.
Services provided to a customer may include showing the property or properties, drafting the offer, presenting the offer, etc. Brokerages use a Customer Service Agreement to document the services they are providing to a buyer or seller customer.
Under the Act, the REALTOR® has disclosure obligations to a customer and must disclose material facts known to the brokerage that relate to the
transaction.
What Happens When…
Buyer(s) and the seller(s) are sometimes under contract with the same
brokerage when properties are being shown or an offer is being
contemplated.
There can also be instances when there is more than one offer on a property and more than one buyer and seller are under a representation agreement with the same brokerage. This situation is referred
to as multiple representation.
Under the Act, the REALTORS® and their brokerage must make sure all buyers, sellers, and their REALTORS® confirm in writing that they acknowledge, understand, and consent to the situation before their offer is made. REALTORS® typically use what is called a Confirmation of Co-operation and Representation form to document this situation.
In offer negotiations, nerves may become frayed, so if you have any
questions when reference is made to multiple representation or multiple
offers, please ask your REALTOR® for an explanation.
Critical Information
REALTORS® are obligated to disclose facts that may affect a buying or
selling decision. It may be difficult for a REALTOR® to judge what facts are
important. They also may not be in a position to know a fact.
You should communicate to your REALTOR® what information and facts about a property are important to you in making a buying or selling decision, and document this information to avoid any misunderstandings and/or unpleasant surprises.
Similarly, services that are important to you and are to be performed by the
brokerage, or promises that have been made to you, should be documented in your contract with the brokerage and its salesperson/broker.
To ensure the best possible real estate experience, make sure all your
questions are answered by your REALTOR®. You should read and
understand every contract before you finalize it.
Acknowledgement by:
______________________________________________
(Names)
I/we have read, understand, and have received a copy of the Working with a REALTOR® – The Agency Relationship brochure:
______________________________________________
(Signature) (Date)
Sellers: As seller(s), I/we understand that
______________________________________________
(Name of Brokerage)
(initial one)
!) Is representing my interests, to be documented in a separate written agency representation agreement, and I understand the brokerage may represent and/or provide customer service to other sellers and buyers.
2) Is not representing my interests, to be documented in a separate written customer service agreement, but will act in a fair, ethical and professional manner.
________________________________________________
(Signature) (Date)
Buyers: As buyer(s), I/we understand that
______________________________________________
(Name of Brokerage)
(initial one)
!) Is representing my interests, to be documented in a separate written agency representation agreement, and I understand the brokerage may represent and/or provide customer service to other sellers and buyers.
2) Is not representing my interests, to be documented in a separate written customer service agreement, but will act in a fair, ethical and professional manner.
________________________________________________
(Signature) (Date)
Brian Madigan LL.B., Broker