Brokerages should have in place certain protocols in the event of multiple representation.
Sometimes, it’s just one agent, and other times it’s two different agents. When it’s just one agent, all the various issues of conflict and disclosure should arise, but when there are two distinct agents, they may each feel that they are simply acting for and protecting their own clients.
No, that’s not the case!
Multiple Representation
These above duties and obligations are modified somewhat by Multiple Representation which we have in this case.
First, the Sellers signed a Listing Agreement and then the signed a Confirmation of Cooperation and Representation.
Then, the Buyers signed a Buyer Representation Agreement and then the signed a Confirmation of Cooperation and Representation.
All three documents included the following wording:
“MULTIPLE REPRESENTATION:
The Seller hereby acknowledges that the Listing Brokerage may be entering into buyer representation agreements with buyers who may be interested in purchasing the Seller’s Property. In the event that the Listing Brokerage has entered into or enters into a buyer representation agreement with a prospective buyer for the Seller’s Property, the Listing Brokerage will obtain the Seller’s written consent to represent both the Seller and the buyer for the transaction at the earliest practicable opportunity and in all cases prior to any offer to purchase being submitted or presented.
The Seller understands and acknowledges that the Listing Brokerage must be impartial when representing both the Seller and the buyer and equally protect the interests of the Seller and buyer. The Seller understands and acknowledges that when representing both the Seller and the buyer, the Listing Brokerage shall have a duty of full disclosure to both the Seller and the buyer, including a requirement to disclose all factual information about the Property known to the Listing Brokerage.
(italics and underlining mine)
However, the Seller further understands and acknowledges that the Listing Brokerage shall not disclose:
• that the Seller may or will accept less than the listed price, unless otherwise instructed in writing by the Seller;
• that the buyer may or will pay more than the offered price, unless otherwise instructed in writing by the buyer;
• the motivation of or personal information about the Seller or buyer, unless otherwise instructed in writing by the party to which the information applies or unless failure to disclose would constitute fraudulent, unlawful or unethical practice;
• the price the buyer should offer or the price the Seller should accept; and
• the Listing Brokerage shall not disclose to the buyer the terms of any other offer.
However, it is understood that factual market information about comparable properties and information known to the Listing Brokerage concerning potential uses for the Property will be disclosed to both Seller and buyer to assist them to come to their own conclusions.
Where a Brokerage represents both the Seller and the Buyer (multiple representation), the Brokerage shall not be entitled or authorized to be agent for either the Buyer or the Seller for the purpose of giving and receiving notices. (in bold print)“
This is a higher disclosure obligation than that would ordinarily apply. Some Brokerages use this fact to encourage prospective Buyers to retain their Brokerage to assist them rather than their competitors.
At the very least a Brokerage should have a set of protocols in place.
Protocols
In a multiple representation situation, both agents should be required to report this matter as soon as possible to the Manager or Broker of Record.
The Manager should make inquiries of the Listing agent.
Are there any facts which the Buyer should know?
Are there any facts which you would disclose if you were acting for the Buyer?
What particular facts have you determined?
What particular facts have you disclosed?
How method was used for disclosure?
Have you verified the facts?
What source did you use for verification?
In terms of investigation are there any facts listed in Forms 820 and following, where you are unaware or unsure of the answers?
If so, that investigation should take place now.
All material facts should be disclosed to the Buyer.
The Manager should make inquiries of the Buyer’s agent.
Are there any particular facts which the Buyer is seeking?
Are there any facts which you should disclose if you were acting for the Seller?
What particular facts have you determined?
What particular facts have you disclosed?
How method was used for disclosure?
Have you verified the facts?
What source did you use for verification?
In terms of investigation are there any facts listed in Forms 820 and following, where you are unaware or unsure of the answers?
If so, that investigation should take place now.
All material facts should be disclosed to the Seller.
This way, both sides know all there is to know!
The common mistake is that the Listing agent doesn’t really appreciate that in these circumstances they are also representing the Buyer, and similarly, the Buyer’s agent is acting for the Seller.
So, if fact “xyz” is material, then it is to be disclosed to the other side. The test is not whether the agent knew the fact. The test is whether the fact “ought to have been known”.
Brian Madigan LL.B., Broker