September 9, 2008
Dealing With Dual Real Estate Agents
Be sure the exact nature of your relationship with a dual agent is clear.
Historically, real estate agents have represented the seller of a property. The seller, after all, is usually the one who pays their commission, and agents therefore have a fiduciary relationship with the seller. This in no way means that agents may operate outside the bounds of the law, regulation and ethical conduct. It just means that the real estate agent is just that, an authorized agent of the seller for a particular transaction.
More recent trends have introduced buyer’s agents, who usually work exclusively for the buyer, and dual agents. Dual agents represent both seller and buyer, particularly in cases where the agent’s company is the listing company. Dual agency is legal in Ontario (officially called Multipule Representaion) however, most consumer advocacy organizations recommend against using a dual agent. This is because there is an inherit conflict of interest for the agent – they receive a commission based on the selling price of the property. The higher the price, the higher their commission, so their reasoning is that dual agents never really have the buyer’s best interests at heart.
If you’ve decided to work with a dual agent, this will need to be disclosed to both the buyer and seller, and they both have to agree, in writing. Dual agents are bound by law and ethics to treat both buyers and sellers honestly, equally, and fairly. Dual agents can be prevented from divulging confidential information about each party to the other as that practice could severely harm negotiating positions.
The bottom line in dealing with a dual agent is to remember that the buyer and seller have conflicting interests in the price and other terms of the sale. It’s very difficult for an agent to truly and equally represent both parties, since the conflicting interests make that inherently impossible. If you do choose to use a dual agent, be sure the exact nature of your relationship with the dual agent is clear, know what services the agent will be performing for you during the transaction, how the agent will be paid, and how any conflicts that arise will be handled.
March 23, 2008
Young homebuyers savvy
Today’s young adults aren’t about to let lingering student loans, uncertain career tracks and stratospheric housing prices stop them from finding their first home sweet home. This investment-savvy generation of 20- and 30-somethings knows a hot market when they see one, and many have developed creative strategies to reach home ownership at a younger age, often without the benefit of a spouse’s salary.
Some buy their first home jointly with a friend or sibling. Others become small-scale landlords, renting out basements or extra bedrooms to tenants whose rents offset the mortgage.
It’s something that a lot of people have to turn to because housing prices are just sky-high, particularly in a lot of the larger cities,” says Brenda Bouw, author of Home Girl: The Single Woman’s Guide to Buying Real Estate in Canada. “I think a lot of people have been influenced by their parents, whose best investment has been their house. They’re feeling pressure to get into the market any way they can.”
About one-quarter of Canadians aged 18 to 34 are homeowners, according to a recent survey by the Canadian Association of Accredited Mortgage Professionals.
See story in the Windsor Star »
February 26, 2008
Understanding Agency Relationships
Concerning Real Estate Clients and Customers
You’d probably wonder what agency relationships might have to do with you, regarding buying or selling real estate. Most people are unaware of the importance of agency relationships, unless they’ve had a problem and have become educated in the importance of knowing what side your agent is on. Yours or theirs?
In a traditional real estate setting here in Ontario most agents are representing the seller and not the buyer. That’s right! When you call a traditional real estate office the agent you are talking to is working for the seller.
Let me take a moment to explain of differences in agency relationships and how they may affect you in a real estate transaction.
In a traditional setting, an agent represents the seller or is a sub agent for the seller. In this setting, when a home is listed by a real estate company, that company automatically represents that seller as outlined in the listing agreement. That brokerage company and it’s brokers have the fiduciary responsibility to represent the best interests of that seller. However, a sub agent to a seller is an agent who is representing a seller that has their real estate listed by another real estate company. These agents have the same fiduciary responsibility to a seller, that the listing company does.
When a buyer is working with a sellers agent, it is important to keep personal information that they’d like to keep confidential to themselves. For instance, maybe a buyer wouldn’t want to share the total amount they are approved for at the bank, or what their top line price is for a home they are interested in purchasing. If they disclose this information to a “Sellers Agent” that agent has the fiduciary responsibility to share that type of information with that seller. A sellers agent is limited to what services they can provide to a buyer.
So, how does a buyer protect themselves? Hire a Buyers Agent.
A buyers agent has the fiduciary responsibility to represent the buyer in a real estate transaction. A buyer will then enter into a representation agreement with that Buyer Agent. This almost like listing a person, to represent them, instead of a property. The buyer agrees that they will work with that buyers agent, as outlined in their representation agreement. This agreement can last from a few days to several months, depending on what the buyer and agent agree on. The agent and client will also agree on the geographic areas that this agreement includes. For instance, an agent in Oshawa many not want to represent the buyer in a transaction in New Market. That way, a buyer could do other real estate transactions through other agencies in parts of the GTA that are not included in the agreement.
The advantages of using a buyers agent include:
The best way to find out how you will be represented, is to ask the agent you are going to be working to define their office policies regarding agency relationships.
February 17, 2008
Exclusive Buyer Agency
What’s In It For the Consumer?
An Exclusive Buyer’s Agent represents only buyers, never sellers, and works for a real estate brokerage that only represents buyers and doesn’t ever take a listing. Why? Because any kind of “agent” has fiduciary responsibilities to their principal, including (but not limited to) advocacy, absolute confidentiality and loyalty to the client so that his or her negotiation ability is protected, transparency in terms of any possible conflicts of interest, honesty and timely communication.
A traditional agent, one who says they’re a Buyer’s Agent, usually works for a firm that also takes listings. What happens when your agent is standing around the water cooler with another agent, say the one who listed the house, and they get to talking about the house. There’s a chance that your motivation to buy may be given away to the listing agent. Now we have a genuine conflict of interest.
This quote from an anonymous listing agent says it all:
“Keep in mind that when a buyer walks into one of my listings at an open house, I am pumping them right when they’re through the door for any nuggets that will get my sellers the highest dollar amount for their house. A consumer is a small fish in a big pond. What they don’t realize is that even the most basic of questions could cost them thousands on the purchase price.”
February 17, 2008
The Agency Relationship
In real estate brokerage industry, there are different possible forms of agency relationship:
1. Seller representation
When a real estate brokerage represents a seller, it must do what is best for the seller of a property. 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 Realtors services and specifies what obligations a seller may have. A seller’s agent must tell the seller anything known about a buyer. For instance, if a seller’s agent 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 agent 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 agent can expect fair and honest service from the seller’s agent and disclosure of pertinent information about the property.
2. Buyer 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 Realtors services and specifies what obligations a buyer may have. Typically, buyers will be obliged to work exclusively with that brokerage 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.
3. Multiple representation (Dual Agency)
Occasionally a real estate brokerage will represent 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 describe the rights and duties of everyone involved and any limitations to those rights and duties.
4. 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 arrangement, 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 Realtor is working for. For example, both the seller and the buyer may have their own agent which means they each have a Realtorwho is representing them. Or, some buyers choose to contact the seller’s agent directly. Under this arrangement the Realtoris representing the seller, and must do what is best for the seller, but may provide many valuable customer services to the buyer. A Realtor working with a buyer may even be a “sub-agent” of the seller. Under sub-agency, both the listing brokerage and the co-operating brokerage must do what is best for the seller even though the sub-agent may provide many valuable customer services to the buyer. If the brokerage represents both the seller and the buyer, this is multiple representation.
Code of Ethics
Realtors believe it is important that the people they work with understand their agency relationship. That’s why requirements and obligations 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 Realtors to disclose in writing the nature of the services they are providing, and encourages Realtors to obtain written acknowledgement of that disclosure. The Code also requires Realtors to submit written representation and customer service agreements to buyers and sellers.