Agency is a legal concept that governs
the conduct of several professionals: Mortgage Consultants,
Insurance Agents, Stockbrokers, Appraisers, Realtors
etc. In the real estate industry, the Realtor has a
legal obligation to work in the best interest of their
client.
Typically, a Realtor represents a Buyer or a Vendor.
In some instances, a situation arises in which a Realtor/Broker
represents both the Vendor and the Buyer. This event
is called Dual Agency.
The
terminology used in the real estate industry is sometimes
confusing. In Ontario, the words "Realtor", "Agent" and "Broker" are
all synonymous. The sales representative with whom
one signs a "Listing Agreement" contract
or a "Purchaser Agreement" contract, is licensed
to work on behalf of this broker.
We believe that it is crucial that every individual
involved in a transaction understands the terms of
the contract they sign and who will pay for the services
rendered. When working with a Realtor, it is important
to understand whom they represent (see chart below).
Please take the time to read the following carefully
if you are planning to buy and/or sell a property through
a real estate professional.
- A
REALTOR is legally obligated to look after the
best interests of the person he or she is working
for.
- The
REALTOR must be loyal to that person.
- A
REALTOR may be your agent if you have clearly established
an agency relationship with that
individual.
- REALTORS
believe it is important that the people they work
with understand when an agency relationship
exists
and when it does not - and to understand
what it means.
In the real estate industry, there are different
forms of agency relationships:
VENDOR’S AGENT
When
a real estate company is a "vendor’s agent",
it must do
what is best for the vendor of a property.
A
Vendor’s agent must tell the Vendor anything
known about a purchaser. For instance, if a vendor’s
agent knows a purchaser is willing to offer more for
a property, that information must be shared with the
vendor. Confidences a vendor shares with a vendor’s
agent must be kept confidential.
A purchaser can expect fair service and disclosure
of pertinent information about a property. Nothing
will be misrepresented about a property. All questions
will be answered honestly.
PURCHASER’S AGENT
A
real estate company acting as a "Purchaser’s Agent" must
do what is best for the Purchaser.
A written contract establishes Purchaser agency. It
also explains services the REALTOR will provide, spells
out who will pay and specifies what obligations a purchaser
may have. Typically, purchasers will be obliged to
work exclusively with that REALTOR for a given time
period.
A REALTOR working for a Purchaser will keep information
about the Purchaser confidential from the Vendor.
DUAL AGENCY
Occasionally,
a real estate company will be the agent of both the
Vendor and the Purchaser in the same
transaction. This is called "dual agency".
Under this arrangement, an Agent is obliged to look after the interest of
both the buyer and the seller. Since the agent
has promised confidentiality, loyalty
and full disclosure to both parties, it is necessary to limit these promises
in this situation and in addition to these limited promises, the Agent is
still obliged to represent both the buyer and the
seller in the transaction with
duties of good faith, obedience, honesty, competence and accountability.
See Dual Agency Consent Agreement for further details
on limits.
A Realtor can be a dual agent only if both the Purchaser
and Vendor agree in writing. Please discuss this with
your Realtor.
WHO PAYS?
Usually,
a Realtor will be paid from the proceeds of the sale.
The Listing Agreement states the Realtor’s fee. Under the M.L.S. system, the fee
offered to the Agent working with the buyer is indicated on the listing advertised
through the M.L.S. system, simplifying the negotiation of the buyer’s
agent fee at the time of the transaction. Where deficiency in the amount of
the fee occurs, the buyer remains responsible for the Buyer Agent’s
fee. Please discuss this matter with your sales representative.
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