As Good As SOLD

Your Realtor: Jekyll or Hyde?

December 30th, 2006

Your Realtor may not be working for you. Surprised? It’s understandable if so, for it is an issue that has often been misunderstood. But the time for clarification has arrived, and ‘Agency Disclosure’ is now a fact of real estate life in Victoria.

Just what is Agency Disclosure and what are its implication for you as a Buyer or Seller of property?

In essence, it is a clarification of the different relationships between Buyers, Sellers and Realtors. It will eliminate the misconception that the Realtor you work with during the purchase of a property is ‘yours’, and looking after your best interest.

It will make clear just which party the Realtor is working for, followed by a written disclosure of that relationship. The Realtor’s role and responsibilities to all parties will now be set out and agreed to in advance of any transaction.

Why is it being done? Are Realtors being legislated into it?

No, it’s not law, but is being implemented as part of the Canadian Real Estate Association’s concern that the public doesn’t fully understand the Realtor’s relationship with Buyers and Sellers, and that it will be in the best interest of all to have a system of acknowledged disclosure in place which spells out the different relationship the Realtor has with all parties to a transaction.

In order that we better understand where things are going, let us briefly look at where they have been. Under the traditional ’sub agency’ system, when a Realtor lists a house for sale he/she becomes the agent of the Seller. Then, through the Multiple Listing System®, all other Realtors become the agent - actually sub agent - of the Seller. And under agency law they owe certain fiduciary duties to that Seller such as loyalty, disclosure and confidentiality. Note that as a Buyer, this puts ‘your Realtor’ on the Seller’s side of the fence. As such, you would not want to tell your real estate agent - or sub agent - anything that you would not tell the Seller - your motivations for buying, for example, or the maximum price you are willing to pay. If you do, the Realtor has a duty to relay that information to the Seller as he/she is legally obliged to represent the Seller’s best interests. Buyers have often misunderstood this agency relationship. They have often assumed they have had representation in a transaction and - understandably - were less than happy when they later discovered they did not.

Agency Disclosure brings things more closely in line with what the public has always supposed to be the case, for as a ‘Buyer’s Agent’ it is now possible for a Realtor to represent the Buyer’s interests exclusively. The ‘Buyer’s Agent’ is able to provide the Buyer with services that under traditional sub agency were not possible - advice and counsel on your bargaining position, pricing and competitive market information, for example - and generally work with the Buyer’s best interests in mind rather than those of the Seller.

Does this create an adversarial arrangement?

Not at all. It simply clarifies which side of the fence the Realtor is on, and to whom his/her fiduciary duties are owed. And either way, the obligation still exists to treat all parties professionally and honestly.

And does it mean the Realtor can no longer represent both Buyer and Seller in the same transaction?

Again, not at all - if both parties give consent. This is called ‘Limited Dual Agency’ and under this relationship the Realtor is ‘limited’ in several respects, such as not divulging the price the Seller is willing to accept or the Buyer is willing to pay, the motivation of either party to buy or sell, or personal information about the other - unless, of course, authorized to do so by the other party. Under Limited Dual Agency the Realtor is essentially a conduit between the two parties. As with Buyer Agency, you will be asked to consent in writing to this new arrangement prior to entering into any transaction.

Will it work?

It has so far. It has been practiced in Alberta for some time, with good reception from the public and little change in practice.

It was also tested in a pilot project in Maple Ridge, BC consisting of some 470 real estate transactions. At its conclusion both public and Realtors were almost unanimous in their preference for this new system.

If you would like the benefit of a short video further explaining Agency Disclosure, just call or write and I’ll be happy to oblige without obligation.

Entry Filed under: Real Estate Matters, Buying a home, Selling a home