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Agency Relationship

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

A broker/sales representative may be your agent… if you have clearly established an agency relationship with that broker/sales representative. 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 brokers/sales representatives 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 broker/sales representative working for you, so that your best interests are looked after. The following are descriptions provided by the Ontario Real Estate Association.

Seller’s Representation

When a real estate brokerage represents a seller, it must do what is best for the seller.

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

The seller’s broker/sales representative must tell the seller anything known about a buyer. For instance, if a seller’s broker/sales representative knows a buyer is willing to offer more for a property, that information must be shared with the seller.

Confidences a seller shares with a seller’s broker/sales representative must be kept confidential from potential buyers and others.

Although confidential information about the seller cannot be discussed, a buyer working with a seller’s broker/sales representative can expect fair and honest services from the seller’s broker/sales representative and disclosure of pertinent information about the property.

Multiple Representation

Occasionally a real estate brokerage will be the broker/sales representative 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 broker/sales representative which means they each have a broker/sales representative who is working for them.

Or, some buyers choose to contact the seller’s broker/sales representative 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 understnad 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.