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In real estate, there are different possible forms of agency relationship:
1. Seller's Agent
When a real estate company is a “seller's agent,” it must do what is best
for the seller of a property. A written contract, called a listing
agreement, establishes seller agency. It also explains services the
company will provide, establishes a fee arrangement for the Realtor's
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's Agent
A real estate company acting as a "buyer's agent" must do what is best for
the buyer. A written contract, called a buyer agency agreement,
establishes buyer agency. It also explains services the company 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 company 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. Dual Agent
Occasionally a real estate company will be the agent of both the buyer and
the seller. The buyer and seller must consent to this arrangement in their
listing and buyer agency agreements. Under this “dual agency” arrangement,
the company must do what is best for both the buyer and the seller. Since
the company's loyalty is divided between the buyer and the seller who have
conflicting interests, it is absolutely essential that a dual agency
relationship be established in a written agency agreement. This agreement
specifically describes the rights and duties of everyone involved and any
limitations to those rights and duties.
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 Realtor who is working for them. Or, some buyers
choose to contact the seller's agent directly. Under this arrangement the
Realtor is working for the seller, and must do what is best for the
seller, but may provide many valuable 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 agent and the co-operating agent must
do what is best for the seller even though the sub-agent may provide many
valuable services to the buyer. If the seller and the buyer have the same
agent, this is dual agency and the Realtor is working for both the seller
and the buyer.
Code of Ethics
Realtors believe it is important that the people they work with understand
their agency relationship. That's why agency disclosure is included in a
self-imposed 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 enter into a written agency agreement with any sellers or
buyers they are representing.
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
is working for. The agent must be loyal to that person. A real estate
company may be your agent – if you have clearly established an agency
relationship with that Realtor. But often, you may assume such an
obligation exists when 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 it means.
