Multiple Representation
This section is entitled “Understanding multiple representation”:
“Multiple representation means a designated representative or brokerage represents more than one client, with competing interests, in the same transaction. This can happen in different ways, depending on the type of representation agreement you and the other clients have with the brokerage:
Brokerage representation:
Multiple representation exists when the brokerage represents both the buyer and seller in the same transaction, or two or more competing buyers interested in the same property — even when the clients are working with different real estate agents.
Designated representation:
Multiple representation exists when the same real estate agent is the designated representative for both the buyer and the seller in the same transaction, or for two or more competing buyers interested in the same property.
Multiple representation is not permitted unless each of the clients involved agrees. You should seek independent professional advice (for example, from your real estate lawyer) before proceeding.
The brokerage or your designated representative has a duty to promote and protect your best interests and avoid conflicts of interest. If your brokerage or designated representative enters into an agreement with another client who has an interest in the same property as you, this places both clients in multiple representation. Multiple representation introduces risks you and the other client should consider.
It’s important to understand the risks. If you agree to multiple representation, the brokerage or designated representative:
• Must treat each of the clients involved in an objective and impartial manner;
• Cannot maintain undivided loyalty to you or promote and protect your interests over the interests of the other client; and,
• Cannot offer advice to you about such things as the price you should offer or accept or terms that should be included in an agreement of purchase and sale.
What to expect before you agree to multiple representation
The brokerage is required to provide you with a written disclosure that explains:
• how the brokerage’s duties or the designated representative’s duties to you will change;
• the differences in the services you will receive; and,
• any change to how much you pay the brokerage.
Until this information is disclosed in writing to all clients in the transaction, and they all agree in writing, the brokerage or designated representative cannot take any further steps on behalf of any of the clients.
Confidential information you provided to the brokerage or the designated representative when you were represented cannot be shared without your written consent.
You can refuse multiple representation
If you don’t agree, the brokerage or your designated representative is not allowed to proceed.
Ask the brokerage or real estate agent about alternatives to multiple representation. For example, if you are a buyer, the brokerage could refer you to another brokerage or another designated representative to help you make an offer on the property.
Agreeing to multiple representation significantly reduces what the brokerage and its agents can do for you, which could have consequences and costs.”
COMMENT
With the new TRESA legislation, multiple representation is far less likely to occur, Under the former Act, if one Brokerage had 500 agents and they were all doing business in one specific geographical area, the chances that one agent had a Seller and another agent at the same office had the Buyer, was really quite high.
The lower level of “Customer service” was eliminated with TRESA, so the old solution is now eliminated. However, the new solution of “Designated Representation” is available and is likely the choice for larger Brokerages.
While it would appear that the RECO Guide has basically been written and designed to discourage multiple representation, it has not been eliminated from TRESA, 2002. It’s still available and sometimes it might work to your advantage.
That decision is your choice, and if it works to your advantage, why not proceed?
Brokerage Level: Multiple Representation
Let’s say we have two agents at the same Brokerage, one has the Listing and you are represented by another. The Listing agent is experienced and sophisticated and your agent is brand new. If you agree to multiple representation through the Brokerage, now you have actually acquired the knowledge of the Listing agent. They are now working on your behalf too! If they happen to know something which is material and relevant to the transaction, then they have to pass this information along.
In fact, with multiple representation the obligation to disclose is even higher, so, that might possibly work to your advantage.
Assuming that this information was discovered by you later, after you moved in, you could sue both agents and the Brokerage, since they were all acting for you and had a fiduciary duty to provide this information to you.
In addition, the Brokerage was under an obligation (to you) to supervise this multiple representation situation. They didn’t. They did nothing. What did the Listing agent do? Nothing! They said: “my duty was to my client, the Seller”! That’s wrong, they just didn’t know it. It’s relatively straightforward in a lawsuit.
It was always this way, in fact for many, many years. Few agents seemed to be aware of the risks or the correct way to handle matters.
Designated Representation Level: Multiple Representation
We have the same potential risks, however, it’s now a little less common. We must have the exact same person acting for both parties. It’s important to appreciate that the same issues are in play. If you are a Buyer you can compromise the interests of the Seller.
Now, the role of the agent changes somewhat. Rather than acting as a “negotiator” on behalf of the Seller, they now become a “mediator” attempting to reach a resolution on behalf of both parties. Sometimes, there is an overall reduction in commission, but, that’s rare if the agent is “sophisticated”.
Advice
In the RECO explanation above was the following statement:
“• Cannot offer advice to you about such things as the price you should offer or accept or terms that should be included in an agreement of purchase and sale.”
The part about the “price” is correct, but, the dual agent can certainly provide all the factual information to the Buyer which should place them right at the low end of what should be offered. So, start there!
Will your Offer be thrown out? Absolutely not, you are working with the same agent. So, in their mediator role, they will get you a “signback”. How much will that be? Again, while they cannot suggest the exact price to the Seller, they can provide all the same factual information to the Seller. And what will the Seller do? They will select the higher end number. The agent mediator will continue with the back and forth until a deal is struck.
In many situations, a mediator attempting to work the deal, and arrange a successful resolution or compromise between the parties is preferable to having two strong negotiators going head to head in combat with neither prepared to back down, simply resulting in no deal at all.
It’s important to remember that in the litigation process, Courts will assign mediators to attempt to effect a settlement between parties. This will likely be another experienced Judge who is able to see that the parties are actually not that far apart. Each litigant will still have their own lawyer representing their own interests, but the mediator is “working the deal”, and will propose a number of possible solutions.
That brings us to “Cannot offer advice to you about such things as the … terms that should be included in an agreement of purchase and sale.”
This is something that RECO just made up. It doesn’t appear in any of the OREA standard form contracts which recite the multiple representation restrictions, ie. the Listing, the Buyer Representation Agreement (BRA), or the Confirmation of Cooperation and Representation (CCR). Nor does it appear as a restriction in terms of the role of a mediator in Court proceedings. The best mediators propose the terms of a solution and the parties accept those terms.
In many situations, as a Buyer you may be facing a situation where a Seller doesn’t want to accept your two conditions, namely 1) financing and 2) inspection. However, you are at a little bit of an advantage if the Listing agent is actually your agent too. They want those two conditions for you! They will contact the Seller and make the appropriate arrangements. They are not going to simply rule out those two conditions, because they have a fiduciary duty to you. So, your chances of success may be greater. They might shorten the time period somewhat, ie. 5 days to 2 days, but the end result is that you were able to achieve the conditional Agreement. They would never wish to be placed in a situation where they were simply forced to say “no conditions” at the outset. They want to protect their own liability.
Safeguards in Multiple Representation
You read above that you should consult with a lawyer, so do it now. You are going along with the multiple representation arrangement but you have some additional protection since you have retained your own lawyer to assist you, now, not later, but NOW.
Advantages of Multiple Representation
There are several advantages to multiple representation including the following:
- ability to neutralize the excellent negotiator
- increased disclosure obligations on the part of the Listing agent
- chance to engage in mediation
- lower commissions in some cases
Recommendations
While I don’t generally suggest or recommend multiple representation, there are exceptions.
Refusal
You are entitled to refuse multiple representation. That’s in TRESA, 2002. You don’t have to accept it.
Frequently, this arises by accident. If you are not comfortable with the multiple representation situation, then, simply terminate the relationship.
There might, of course, be some consequences. Assuming a quick termination, the agent might like reimbursement for some expenses or even a commission fee. All of that should be set out in the Listing or BRA, so it is clear from the outset. Be careful to read any standard form clauses and provisions: they may be illegal.
Brian Madigan LL.B., Broker