Buyer Offer Registration System (for Buyer Brokers)

Actually, usually there’s no such thing and that’s a potential problem.

Consider the following situation, Bob, the Buyer, has been working with Mary, his real estate professional, and Henry, the Buyer, has been working with Marco, his real estate professional.

They are both looking in the same price range in the same neighbourhood. With so much competition these days, they are frequently one of many potential buyers all participating in a bidding war.

Here’s THE problem: Mary and Marco both work for ABC Realty Inc. a large Brokerage in the area which employs 700 representatives.

They both are interested in submitting an Offer on Mildred’s property which she has listed through David of XYZ Realty Inc., a Brokerage with about 25 representatives.

Dual Agency

The concept of dual agency was developed in response to a potential conflict. What if one Brokerage represented both the Buyer and the Seller? There would be a conflict and both the Buyer and the Seller would have to know about it and consent to the arrangement going forward.

Multiple Representation Defined

It was determined several years ago, that there was one further example of dual agency. This occurred when the same Brokerage represented two separate Buyers who were “competing” for the same property.

Rather than describe this arrangement as “dual agency”, the concept of “multiple representation” was developed to cover both situations. At the time, the Real Estate and Business Brokers Act, 2002 was updated, “multiple representation” was the new term and covered both scenarios. The Act came into force on 31 March 2006. It is noteworthy that other jurisdictions still refer to dual agency as does the Canadian Real Estate Association in its Code of Ethics.

Multiple Representation Disclosure to Clients

The Code of Ethics sates as follows:

Disclosure before multiple representation

16. A brokerage shall not represent more than one client in respect of the same trade in real estate unless it has disclosed the following matters to the clients or prospective clients at the earliest practicable opportunity:

1. The fact that the brokerage proposes to represent more than one client in respect of the same trade.

2. The differences between the obligations the brokerage would have if it represented only one client in respect of the trade and the obligations the brokerage would have if it represented more than one client in respect of the trade, including any differences relating to the disclosure of information or the services that the brokerage would provide. O. Reg. 580/05, s. 16.

This means that agency and potential conflicts must be explained. In our example, both Bob and Henry need to know about each other. And, they both have to agree to move forward with the Brokerage offering Client Services (agency) to each of them.

Multiple Representation Disclosure to Others

There’s more to the puzzle than just Bob and Henry; Mildred needs to know about this too. While generally, it may not matter to Mildred, she is now made aware of the fact that there are two competing bids on her property both from ABC Realty Inc. This might matter and be of critical importance in a land assembly.

Here is the provision from the Code:

Nature of relationship

17.If a registrant represents or provides services to more than one buyer or seller in respect of the same trade in real estate, the registrant shall, in writing, at the earliest practicable opportunity and before any offer is made, inform all buyers and sellers involved in that trade of the nature of the registrant’s relationship to each buyer and seller. O. Reg. 580/05, s. 17.

So, Mildred needs to know that Bob and Henry are both represented by ABC Realty and they are both receiving Client Services (agency). If one were a Customer, that would have to be disclosed too. Look at the wording in the section, it says: registrant…..

1) represents, or (this is Client Services, agency)

2) provides services (this is Customer Services, non-agency).

Multiple Representation Conflicts and Issues

The first and primary issue is whether either party would be favoured in any way. The next matter, is full disclosure to both parties. Then, there’s the matter of what issues will remain confidential. These would include, motivation, price and the contents of other Offers.

Multiple Representation Authorization and Consent

It will be necessary to document “permission, or the consent to proceed”. While there is a document which deals with the dual agency disclosure when it comes to Buyers and Sellers, there is no such document in common usage for the disclosure between two competing Buyers, in our example Bob and Henry.

The Current Situation

The prevailing trend at the moment is to have both Mary and Marco prepare Offers for their respective Clients, Bob and Henry.

The Offers are both registered, and they each present their Offers, Mary at 7:00 pm and Marco at 9:30 pm, given that there are 14 Offers to be presented in total.

It suddenly occurs to David, the Listing agent that Mary and Marco are from the same Brokerage. Being the “good guy” that he is, David phones them both and tells them that they are both competing from the same Brokerage. Then, they each contact their respective Clients and receive authorization to proceed. It’s too late, by the way for Mary, Bob’s Offer is already in and cannot be withdrawn. As for Henry, Marco was just about to submit the Offer. Now, he must wait, pending “multiple representation approval”. Mary calls Marco, confirms that it’s OK to proceed, Marco submits the Offer and all is well.

You can appreciate that in this scenario we are all relying on the “good graces” of David. We expect him to pick up the same Brokerage when he is in the process of advising his Client, the Seller in respect to the 14 Offers that are coming in. You have to admit that he’s busy, and he has other priorities. In addition, it doesn’t help that both Mary and Marco use different logos, different colours, different cards and different phone numbers, even though they are from the same Brokerage.

So, all in all, we are “lucky” that David spotted ABC Brokerage, second time around, some two and one half hours later.

Buyer Offer Registration System

Consider this approach. Peter, the Broker of Record at ABC Realty implements a new system for all his office. If you are about to submit an Offer, call reception and advise of the date and time of the Offer presentation, the name of the Listing agent, the municipal address of the property and the legal description.

So what would happen? Mary would call first and Marco would call later. When Marco calls, he would be informed that Mary already has an Offer going into David tonight on Mildred’s property at 123 Main Street, Lot 15, Plan 1256, Toronto. The receptionist would then call Mary to inform her as well.

How simple is that?

And, Mary, Marco and ABC Realty all get to comply with their legal duties and obligations under the legislation without relying on David.

Brian Madigan LL.B., Broker

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