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Brian Madigan LL.B., Broker

RE/MAX West Realty Inc.,
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 

Phone: 416-745-2300

Cell: 647-404-8150 
Toll Free: 1-888-507-0817

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Buyer's Agency and Some Concerns

July 8, 2013 - Updated: July 8, 2013


There is a significant and important trend in the real estate industry towards buyer's agency.


You may recall that many agents enter into a sub-agency co-operation agreement with the listing agent. This means that they share in the commission payable should they sell the property. It also means that they, in addition to the listing agent, act for the vendor.


This doesn't seem fair to have two agents both representing the seller while the buyer is on his own.


The Code of Ethics under the Real Estate and Business Brokers Act, 2002 was changed and the expectation now is that the  buyer's agent will owe their duties and obligations to the buyer, even though they may receive their compensation from the seller. This is a substantial and important change.


Wouldn't you be surprised to find out that your lawyer, the one you picked for your personal injury lawsuit was actually acting for the insurance company that you were suing? Not only that, your lawyer owed fiduciary duties to the insurance company as a client, but only had to treat you with ordinary care, in fact, the same duties owed to a stranger.


Until the 1990’s, that was the way it was, in the real estate business. Seems very peculiar!


The presumption has been reversed, it is now presumed that the buyer's agent will be acting for the buyer. There are, however two classes of buyers: the good buyers and the not-so good buyers and there is a legal relationship for each of them:


1) the client relationship, and

2) the customer relationship.


If you are a Client, then your real estate agent owes you certain fiduciary duties including disclosure, competence, obedience, accounting, confidentiality and loyalty.


If you are merely a Customer, then you are owed honesty, fairness and due care. But, these are the same duties owed to just about anybody. So, you are really not much better off, than if you were simply a stranger. (In fairness, I should point out that there are some minimum statutory obligations as well).


If you have a choice, you definitely want to be a Client. This relationship will commonly be evidenced by a buyer representation agreement (or for short, BRA).


It will set out in writing exactly what your agent will do for you. In addition, it will, usually be "exclusive", meaning that you may only deal with that particular agent. And, if you buy through a second agent, you as the buyer still have to pay a commission to the first agent.


So, you will have to enter into this type of arrangement very carefully. Make sure you have the right person. Limit the time period and the boundaries. Remember to specify the type of property, and the method of acquisition.          


Let's take the case of Mary and Bob. They have lived together in a rented house for the last two years. They are planning to have a family, so they decide to buy a house in the Spring. They sign the usual buyer representation agreement but find that all the houses their agent showed to them, were too expensive or were just not suitable. They resign themselves to trying again next year and renew their lease.


They come upon an agent whom they really like and would prefer!


One little problem, they renewed their buyer representation agreement, and they still owe a commission to their first agent. They are not yet "free" to get a new agent, or they can pay both agents.


It is noteworthy that any time period in excess of 6 months must be initialled.


So, be careful, and don't forget to read the document, including the fine print.


Brian Madigan LL.B., Broker

Tagged with: buyer agency bra representation code of ethics rebba 2002
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

Phone: 416-745-2300

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