That’s pretty simple... or at least seems pretty simple on the surface. However, in the world of Real Estate Sales, things are much more complicated than anyone would prefer and will likely stay that way for several years to come.
The root of the problem is that the courts have discovered that Realtors have thought they could serve both parties to a real estate transaction, and in some cases have lead the parties to a transaction that both sets of interests were/are being served. It isn’t pretty...
It gets even more complicated when you understand that it is not only the listing agent who owes total allegiance to the seller, but in most instances, that same allegiance is owed to the seller by all the other Realtors working within that same brokerage (which could be several offices). And, in the absence of a Buyer Agency Agreement the behaviour of agents who represent other brokerages may come under close scrutiny.
In the world of real estate “service” you are either a client (the Realtor has a duty to serve your interests) or, a customer (think ‘giant retailer’ associate).
In dealing with a customer, a Realtor cannot:
provide information relating to the sellers motivation to sell, or any other information the seller has provided, that the seller could hold to be confidential,
offer advice with respect to price or other terms of an offer to purchase,
offer advice relating to competing properties that could be seen as equal or better in any respect,
disclose any other information that would harm or weaken the sellers position in negotiating the sale of their property.
The only time that I, personally, would accept a customer relationship in a real estate transaction would be if I knew more about the property than both the seller and the seller’s agent combined, and, my lawyer was better at real estate than their lawyers. And even if that were the case, I would likely have an interest (for negotiating leverage) in identifying comparable sales and other properties currently on the market and having assistance in interpreting that information.
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The worst surprise is when you discover that you were actually a customer and that someone did not point out the implications, or worse, gave you some reason to believe that you enjoyed some or all the benefits of a “client-agent” relationship.
The danger for a Realtor is that in answering a routine question from a buyer, they could establish the impression of an agency relationship with the buyer and in the process, breach their duty to a seller.
In Canada, most jurisdictions are emphasizing and focusing attention on specific disclosure of the relationship (Representative Capacity) and at the national level the industry has established standards with respect to
• when the disclosure is made,
• the completeness of the disclosure (to avoid misunderstanding), and
• what does, and does not, trigger the need for disclosure.
The national standard has offered the view that, “Essentially, the triggering event hinges on whether confidential information has or may be inadvertently shared.” It should be remembered that the nature of “confidential” is viewed from the perspective of the consumer who is the principal in an agency agreement, typically the seller (by virtue of a listing agreement) or the buyer (if a Buyer Agency agreement exists). In the event of a dispute the matter will be adjudicated by the courts or an industry regulatory body.
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For a number of years, the Real Estate Industry has used “Limited Dual Agency” agreements in an attempt to resolve the problems associated with the competing interests of buyers and sellers. Limited Dual Agency has been reviewed by the courts (2001) and “According to the Judge, the notion of dual agency was untenable, as there was no way that the agent could meet the obligations of representing competing interests.” *
Despite the courts findings, Limited Dual Agency will likely continue to be used for some time. In general it has provided a reasonable solution as evidenced by the limited number of disputes relating to its use.
The Real Estate industry is moving towards other solutions in the need to meet the requirements and competing interests of buyers and sellers.
The Buyer Agency Agreement is a key element in these solutions and it is available now!
In the Halifax area of Nova Scotia call me at: (902) 877-7654 or contact me by email
© 2007
David L. Potter
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