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Agency Relationship

Brokers/sales representatives or real estate brokerages are governed by the legal concept of “agency”. An agent is legally obligated to look after the best interests of the person they are working for. The agent must be loyal to that person.

We as brokers/sales representatives believe it is important that the people we work with understand what an agency relationship is.

In Real Estate, there are different possible forms of agency relationship:

  • Seller Agency (Listing Representation)
  • Buyer Agency (Buyer Representation)
  • Dual Agency (Multiple Representation)

It’s important to you to understand these relationships, should you consider to buy or sell any real estate. Be sure you have your broker/sales representative explain agency law to you so that you completely understand the relationship, if any, you may have with the agents involved. Buyers and Sellers will always be told, in writing, who a broker/sales representative is working for.

It is best for you to have a contract up front with any agent working for you, so that your best interests are looked after. The following are descriptions provided by the Ontario Real Estate Association.

Buyer’s Representation

A real estate brokerage representing a buyer must do what is best for the buyer.

A written contract, called a buyer representation agreement, creates an agency relationship between the buyer and the brokerage, and establishes buyer representation. It also explains services the brokerage will provide, establishes a fee arrangement for the brokers/sales representatives services and specifies what obligations a buyer may have.

Typically, buyers will be obligated to work exclusively with that company for a period of time.

Confidences a buyer shares with the buyer’s agent must be kept confidential.

Although confidential information about the buyer cannot be disclosed, a seller working with a buyer’s agent can expect to be treated fairly and honestly.

Multiple Representation

Occasionally a real estate brokerage will be the agent of both the buyer and the seller. The buyer and seller must consent to this arrangement in writing. Under this “multiple representation” arrangement, the brokerage must do what is best for both the buyer and the seller.

Since the brokerage’s loyalty is divided between the buyer and the seller who have conflicting interests, it is absolutely essential that a multiple representation relationship be properly documented. Representation agreements specifically describes the rights and duties of everyone involved and any limitations to those rights and duties.

Customer Service

A real estate brokerage may provide services to buyers and sellers without creating buyer or seller representation. This is called “customer service”.

Under this agreement, the brokerage can provide many valuable services in a fair and honest manner. This relationship can be set out in a buyer or seller customer service agreement.

Real estate negotiations are often complex and a brokerage may be providing representation and/or customer service to more than one seller or buyer. The brokerage will disclose these relationships to each buyer and seller.

Who’s working for you?

It is important that you understand who the broker/sales representative is working for. For example, both the seller and the buyer may have their own agent which means they each have a broker/sales representative who is working for them.

Or, some buyers choose to contact the seller’s agent directly. Under this arrangement the broker/sales representative is working for the seller, and must do what is best for the seller, but may provide many valuable services to the buyer.

A broker/sales representative working with a buyer may even be a sub-agent of the seller. Under sub-agency, both the listing brokerage and the cooperating brokerage must do what is best for the seller even though the sub-agent may provide many valuable services to the buyer.

If the seller and the buyer have the same broker/sales representative, this is multiple representation and the broker/sales representative is working for both the seller and the buyer.

Code of Ethics

Brokers/sales representatives believe it is important that the people they work with understand their agency relationship. That’s why requirements and obligation for representation and customer service are included in a Code of Ethics which is administered by the Real Estate Council of Ontario.

The Code requires brokers/sales representatives to disclose in writing the nature of the services they are providing, and encourage the brokers/sales representatives to obtain Written acknowledgement of that disclosure. The Code also requires brokers/sales representatives to submit written representation and customer service agreements to buyers and sellers.

Advantages of Buyer Agency:

Buyer representation allows your broker/sales representative to:

  • Protect and represent your best interests.
  • Explain the process & asses your needs.
  • Fully disclose to you all the pertinent facts about a given property.
  • Supply Financing options.
  • Keep information about you (the buyers) confidential from the seller.
  • Act as a skilled negotiator
  • Buyer Representation is established through a written contract between the Buyer and a broker/sales representative