A closer look at your relationship with your real estate professional
Buying a property can be a difficult task, so retaining the services of a Realtor® is more than highly recommended. However, there is more than one type of relationship you can have with your agent. When buying, there are two types of Agreements that you may consider: the Buyer Representation Agreement and the Buyer Customer Service Agreement. In either case, when you sign an agreement, you’re legally signing it with the brokerage, not the individual sales rep. That means you are technically represented by the brokerage. So when Jamie works with you, all of Private Service Realty Ltd., Brokerage is behind you!
One Agent or Several?
Having one person working for you is always better than using multiple agents, even though you might think it makes sense to have more than one person looking on your behalf. The only time it makes sense to have more than one Realtor® is if you are looking in different cities, or trying to simultaneously buy a cottage and a downtown home (agents will typically specialize in a certain geographic area or niche market and so you might want an area expert helping you look).
partnership agreement by o5com
Working with multiple agents in the same geographic area not only creates unnecessary duplication of effort, you may be legally liable to compensate both agents, depending on the terms set out in your Buyer Representation Agreement (if you sign one). And regardless of your written contract, if an agent knows you are ‘cheating’ on them, they probably won’t commit their full time and services to you, because they are working on spec and know they might never get compensated for their efforts on your behalf.
Buyer Representation Agreement
The Buyer Representation Agreement is what you sign when you want an agent to work on your behalf during the transaction. You are considered a client and the agent commits to representing your best interests throughout the process. At the same time, you are committing to working with that agent exclusively, meaning you agree to use their services, not those of another Realtor®, when it comes time to buy your home.
The contract contains certain elements that you will determine with your agent, for the benefit and protection of both parties:
- Length of time the Agreement will be in effect (typically three to six months)
- Property Type (generally the terms used are ‘Residential’ or ‘Single Family Residential’
- Geographic Location (can be vague, like ‘GTA’ or confined to a very specific area)
- Commission (as a buyer, you do not have to pay commission – with very few exceptions – as it will come from the seller’s proceeds of the sale. The commission portion of the Agreement just shows you how much your agent will be charging the seller’s agent)
- Holdover Period (extends usually at least 30 days after expiration of the Agreement has expired, to prevent you from buying a property introduced to you by the agent without paying commission to that agent even though the agreement is now expired)
A Buyer Representative’s Duties to You
When you enter in to a Buyer Representation Agreement, the agent (which is really the brokerage, as represented by the individual Realtor®) is governed by a strict Code of Ethics and is legally obliged to ensure all parties are treated fairly and with the highest possible level of service. These are the fiduciary duties that an agent owes to their client:
- Accountability – The agent must maintain accurate record keeping and responsibly hold all funds and monies on behalf of the client.
- Confidentiality – The agent must not use any information received from the client in a way that may harm or negatively affect the client
- Competence – The agent must maintain a sufficient level of knowledge and skill and exercise the care and professionalism shown by an average person in the field
- Good Faith/Full Disclosure – The agent is required to disclose any direct or indirect personal interest they may have regarding a transaction, as well as any known relevant information that may affect the value or desirability of a property to the client
- Loyalty – The agent must always place the interests of the client above all else except the law and must act solely in the best interests of the client
- Obedience – The agent must follow the clients’ lawful instructions regarding a transaction whether the agent agrees with them or not.
Buyer Customer Service Agreement
A Buyer Customer Service Agreement is used when the buyer does not want to commit themselves to any one particular agent. When you sign a Customer Service Agreement, you are basically saying you will represent yourself during the transaction and that the agent will be working on behalf of the seller and be looking after the seller’s best interests. Why would any buyer select this option? Well, such an agent could still help you search for specific properties, show the properties to you, and write up an offer. But ultimately it would be up to you to inquire and verify any information regarding the property.
In this type of arrangement, you can work with any number or combination of agents you want and you will never be liable to pay commission to anyone when you buy a home, unless this is previously agreed by both parties in writing.
This occurs when the agent acts on behalf of both the buyer and seller. But don’t let this scenario alarm you; remember, for the purposes of a contract, ‘agent’ means ‘brokerage’. So if you are under a Buyer Representation Agreement with Jamie, and the property you are bidding on is listed for sale by his same brokerage (Private Service Realty Ltd., Brokerage), this is considered a Multiple Representation situation; even though Jamie himself is still looking after your best interests, every step of the way.
Multiple representation situations are fairly common and must be acknowledged by all parties in writing prior to any offer being submitted.
No matter which type of representation (a.k.a. ‘agency’) you select, it’s important to make sure you are comfortable with your Realtor® and that he truly cares about your needs. The whole point is for your agent to make the entire home buying process more enjoyable and relaxing for you!