Agency Law for Sellers

REALTORS 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 represents. The agent must be loyal to that person.

A real estate brokerage may be your agent – if you have clearly established an agency relationship with that REALTOR with a representation agreement. But unless that agreement has been entered into between the Realtor and their client, it is possible that a buyer or seller could assume such an obligation exists when in fact it does not.

REALTORS believe it is important that the people they work with understand when an agency relationship exists and when it does not – and understand what that means.

That is why requirements and obligations for representation are included in a Code of Ethics which is administered by the Real Estate Council of Ontario. What follows is an explanation of the different levels of services that are offered by Realtors in accordance with Federal Legislation governing the industry in the Province of Ontario. Furthermore, this requirement also enforces REALTORS to verify the identity of sellers and buyers, and who is working for whom.

What follows is a description of the different levels of services, required by Realtors. In real estate law, there are different 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. This results in a primary legal relationship with the Seller and his/her best interests at all times including my competence, accounting for my actions, full disclosure, good faith and obedience. I must provide the Seller with any and all facts that might influence their decision such as the price a Buyer is willing to pay, hold in confidence any information about the Seller, and Advise the Seller of who is representing the Buyer, such as a co-operating broker/salesperson.

A seller’s agent must tell the seller anything he or she knows 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 sellers. 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 Realtor’s 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. And moreover, a buyer can be guaranteed that his/her realtor must do under penalty of law, what is best for the buyer at all times. 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

Occasionally a real estate brokerage will represent both the buyer and the seller. The buyer and the seller must consent to the 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 agreement 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.

As you can see, realtors can work with buyers and sellers. It is important that you understand who the Realtor is working for, whether you are a buyer or a seller.

To further understand Agency Law and its’ benefits to both the Buyer and the Seller, what follows is and education of the actual relationship that is created between the Seller and his/her Realtor, as well as the Buyer and his/her Realtor.