You Know What it Means?

Carolyne (Realty) Corp.
1-(888) SOLD-ONE


*This material is copyrighted by Carolyne Realty Corp. and may not be reprinted without permission in writing.
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REPRESENTATION - Do you have it?

Real estate is local. Rules and regulations vary from Board to Board areas and locales. In our trading areas, locally, this is how real estate is currently being practised.

Are you “represented” ? This means “does your agent work FOR you, or with you” ?

If you, as a Buyer, have an agent working FOR you, it means you have a contract in place that verifies this is so. If you have no contract, then the agent is working WITH you, but not FOR you. We are not dealing with the semantics of the English language. These are the facts: facts you as a Buyer and Seller need to know. Why do you need to know? It is vital either to have representation, or for you to know and understand why you do not have representation.

When you list your house for sale, by virtue of having signed a listing “contract” you are by default, “represented”. Representation flows with that contract. The public has come to understand and expect to have a listing contract, when they are selling a property. By contracting for the services of a listing “company” (read Agent), the company now has a fiduciary duty to you, and only to you. The salesperson/agent now represents “you” and only you, unless stated otherwise, as the owner/Seller. The agent cannot therefore work “for” the Buyer at the same time, without special permission. The agent can bring a Buyer to view your home, but if that Buyer decides to make an offer you must give your permission for the agent to become a dual agent, and the Buyer must also agree that the agent is permitted to work for both parties. In fact, in your listing contract you have already given the agent permission to sell your house himself, acting as a dual agent, but the Buyer doesn’t know that, because the Buyer is not privy to viewing your private contract with the listing company. The would-be Buyer thinks the agent is “his agent”, because the agent “showed the house to the Buyer”. Not so necessarily, and not so, likely.

We are experiencing an anomaly in our local market, because Buyer Agency, although it has been on the books as it were for a long time, has not been practised as such; therefore, we are seeing agents acknowledge on an offer presentation that they are “representing” the Buyer, but often they are still performing actions that speak to the issue in a different manner; their actions say they are really performing as sub-agents, sharing information with the Seller, that under Buyer brokerage must not be shared because it defeats the purpose, for the Buyer, of having a Buyer Agent. Part of the purpose of the Buyer having representation is so that all the Buyer’s information is held in confidence, the same way the Seller’s personal information is meant to have been held in confidence; that all the research done on behalf of the Buyer, by the Buyer Agent, is to enable the Buyer to get the best deal possible. The best deal possible is not only related to the sale price, but other issues that enter into the negotiating process as well. When working under contract “for a Buyer, none of the Buyer’s information should be divulged to the Seller, since the information could and does impact the final outcome for the Buyer. The Buyer Agent is being paid to work FOR the buyer and WITH the Seller, not FOR the Seller, when a Buyer has his own contract. There again we speak to the definition of terms. This is important language differentiation. Have your agent explain it to you. His training has been substantial in this regard. Listen carefully as he reviews definitions and terms with you.

When a listing agent shows his own listing, showing the house to the would-be Buyer does not make the listing agent the “agent for the Buyer” specifically. The Buyer needs a Buyer broker contract in order to have Buyer “representation”, otherwise the agent is working FOR the Seller, and WITH the Buyer. In this case, the agent is forbidden from sharing with the Buyer, private information received from the Seller. Makes sense if you think it through. The Seller may have said for example: I want to list my house at $259,000 but I will take $250,000. This information is private and under contract must stay between the Seller’s agent and the Seller, and must not be shared with the Buyer, or the Buyer’s agent, under any circumstances. The agent cannot and in fact must not ever say for example: well, Mr. Buyer, just bring me an offer around $250,000 and I know we can make a deal and get this house for you. If a listing agent ever says this to you, as a Buyer, he is not performing his fiduciary duty by which he is contract-bound to his Seller. If he would do this to his own Seller, what would he do to you, under similar circumstances? Given the opportunity, would this agent work behind your back, too? An agent can become an agent for a specific party, by his actions. So an agent must be super conscientious in choosing his words when dealing with the public.

There is a difference between an agent acting as a sub-agent or an agent. When negotiating for the Buyer who does not have a contract of his own with an agent, the agent is then really acting as an agent for the Seller, by default, because the Seller does have a contract. In real estate transactions, the one with a contract is a client; the one without a contract is a customer. The Seller has a listing contract. The Buyer, ideally, should have a written Buyer contract. Of course there sometimes are oral agreements that must be adhered to, but they are difficult to keep records for, and good records must be kept, for sure, in any real estate transaction. It is not sufficient to say – he said, she said. Instructions must always be in writing if they are to be implemented for the good of all concerned, if for no other purpose than for follow-up and follow-through record-keeping purposes: keeping a good paper trail is a vital part of any transaction; being able to follow date lines and time lines is a crucial part of the process.

Yes, the listing sales rep can sell the listed house to a Buyer, but the “agency” type MUST be identified up front, defined and disclosed to all parties. This sounds complicated and difficult. It doesn’t need to be complicated or difficult at all; it is simply a matter of explanation as to who “represents” whom. If you feel comfortable working with the listing agent, you certainly can proceed. As a Buyer, if you don’t have a specific Buyer contract, you will need to be put on notice to determine that you are comfortable knowing that the agent’s onus and obligations lie with the Seller, and you are prepared to be a customer. Failing which, the agent will need to seek special validation that the Seller is in fact giving his permission for the agent to act as a dual agent.

Realtors are advised that, right up front when they meet would-be Buyers or Sellers for the first time, or at least at the first logical opportunity, that they must have the Buyer(s) and/or Sellers sign off on a document that says they understand agency – that they understand whether or not they, in fact, have “representation”. Otherwise how does the agent know what kind of conversation to have with the Buyer or the Seller; what kind of information can or cannot be released. The would-be Buyer needs to know that he either does or does not have his own agent, his own representation. There is nothing difficult to understand. All this document does is explain the different types of agency and permits the Buyer and Seller to decide if he wants to be “represented” yes or no. When anyone, Buyer or Seller, has representation it means that his or her specific private information cannot, must not, and will not, be shared with the other side, is all. And representation carries with it fiduciary duty, obligating the agent to do his utmost best for his client’s position. This does not only mean as regards to money involved in the transaction. (See other articles on our web site that explain the full workings of a real estate transaction.)

If you as a would-be Buyer feel comfortable working together with an agent, suggest to the agent that you would like to have “your own contract” for representation. If the agent is selling his own listing, that is an ok thing to do, but is handled differently, and is expressed as dual agency. There is nothing necessarily wrong with dual agency, as long as everyone involved understands it. What it really means is that all information is forfeited by both sides, in order to put a contract together that both sides are happy with, is all, in the end. There are no secrets.

If the Buyer signs a Buyer contract, the Buyer then has “contracted for” specific representation and is now a Buyer “client” to whom an agent can “give advice”, rather than just the “information” he would otherwise receive. Without a contract in place the Buyer can only receive information, not advice, as how to proceed. With a Buyer contract in place, the agent is then working specifically “for the Buyer” and not for the Seller when the appropriate property is located. This means the Buyer agent works exclusively for that Buyer to find the appropriate property the Buyer is looking for, during a specific period of time, with the property to be located in a specific location e.g. town/city, and whether or not the property is residential, commercial or what have you. Typically there would be a maximum purchase price or a price range indicated on the Buyer contract, so that the agent has some instruction as to the sort of property that would appeal to the Buyer, and so that he can conduct himself accordingly in doing the necessary research.

If you have made contact with an agent, as a Buyer, you need to know just exactly who is this agent working FOR. The contract addresses this and many other details. Typically you would think the agent is working for “you”. Not so, unless you have hired (contracted with) this agent to represent you and only you. The agent, without such a contract, specifying the details, is working for (guess who?), the other side – the Seller, as a sub-agent of the Listing company. The agent, by virtue of not having a contract specifying that you have “all” the fiduciary duty associated with a contract, automatically becomes a sub-agent of the Seller; duty bound to give up your personal information to the Seller. Example: you tell the agent that you understand the Seller is asking $259,000 for the house, but that you would like to open negotiations by offering $250,000 and that you will go up to $255,000 if you really have to. Guess what! Without a Buyer contract in place, the agent is “obligated” to divulge this conversation. No contract means he is working as a sub-agent of the Seller, and must relay the information you provided, to the Seller. The agent is in no way duty-bound to you. In fact, he is duty-bound to the Seller, and must pass this information along to the Seller, through the listing agent. Now what chance do you think you have of acquiring the property at your opening amount? NONE! Why, you say. Go back and read the previous information here, again.

If you already have an agent, ask them to explain “agency” to you. Insist. They must know how, or they are not equipped to do the job. Either they are working “for you”, or “with you”. If they are working for you, they must keep your information private, whether you are the Seller or the Buyer and that means they are obligated not to release any information you have given to them, as it may defeat your position in negotiating for the best contract (read the other articles about Best Contract – Best Offer, on our web site). If the agent is working with you and not for you, the agent is permitted only to provide general information to you and is not permitted to offer to you, specific advice. Only clients get advice; those without a contract are customers, and as such are entitled to and must get general information only.

Why would you want to tie up the hands of the agent you think is working in your best interests, by not committing the agent to a contract? If you want the agent to work “for” you, the agent needs a contract. That’s not to say the listing agent cannot sell his own company listing. All this is about understanding who has and who has not contracted for representation. If an agent ever tells you that you can “get a better deal” by making your purchase through the listing agent, this is not only wrong because it cannot be true, it is against the ethics and morals of the real estate business. The listing agent has a contract to represent the Seller, and by saying any such thing to you, has just broken his contract and his fiduciary duty with his Seller, to whom he is duty-bound - to represent the Seller. Would you want that agent to “represent you”, list your house and then say such a thing? By offering this information or advice to a would-be Buyer, the agent does not perhaps realize that he has just committed a major faux pas to his Seller, who, learning of this conversation has every right to fire the agent, and perhaps sue for damages.

The bottom line is: Are you represented? And if not – why not? It costs you nothing to have this definition of terms explained to you, and in fact may save you tens of thousands of dollars. How can an agent “negotiate” on your behalf, when you have not given him the tools to do the job properly? If only you had known, you would have asked for “representation”. Why didn’t you know? Why didn’t the agent explain it to you? Likely the short answer is because it takes time. Time is money. The agent wants to put another deal together, so he sometimes doesn’t care if you know or do not know what you need in order to get the “best deal”. Now you know. Use this information to your own advantage. Next time you meet an agent, ask the agent: WHO are you working for? Me, or the other side? Tell him: I want you to work FOR me. What do I have to do to make that happen? I want the best deal. How can we work together to get me the best deal? Prove to me that you are working FOR ME. Show me the contract. Where do I sign? Where’s my contract?

Of course you can always call Carolyne. Carolyne will take the necessary time and go through the necessary steps to help educate you, so you will know exactly what to expect and from whom. As your agent, whether buying or selling, Carolyne will make sure you understand exactly what you are “contracting for”. The key word is “representation”. MAKE SURE YOU HAVE IT. Without a contract that says so, you have no representation. How can you possibly enter into negotiations to make maybe your most important life purchase, without a contract with “your own” agent? Think it through and insist on having “representation”. It’s your right. Hire a buyer broker agent when you are ready to buy a house. It’s just the reverse procedure of a listing contract: a contract to sell a specific house. If a Seller lists with more than one company, the Seller has set himself up to be liable to pay more than one commission. If as a Buyer, you sign a contract with more than one agent, you, too, could find yourself in the position of having to pay two or more agents.

There are no silly questions. The only silly questions are the ones that don’t get asked. ASK. Ask as many questions as you can think of. Ask for proof. Ask the agent to sign you up to a contract, so you know that “you” have representation. You will find that some Buyer’s agents charge by the hour; others charge a specific fee sometimes covered by the listing broker co-op commissions, other times not. Paperwork needs to be in place to specify who gets paid by whom, and how much. In today’s marketplace there are no norms. There no such term as “standard” commission. An agent gets paid what they are worth. If they cannot negotiate their own commissions, how on earth are they going to be able to negotiate the best price for you, when it comes time to sit down and discuss an offer? They can’t even negotiate their own paycheck. This should speak volumes to homeowners and Buyers, alike.

Choose your agent carefully. The best investment either a Seller or a Buyer can make is their choice of agent. Choose carefully. Protect your own position. Seek proper representation.

This is not legal advice. If you have any legal questions, hire an attorney – not just any lawyer, but rather one who specializes in just real estate law. Like agents who try to cover too many bases, selling stores and businesses as well as residential properties and recreational properties and farms – there is much danger in today’s business environment by practitioners who wear many hats, so to speak. You need to put a team in place where everyone is working in “your” best interest.

Carolyne is proud of the support team of attorneys, professional building inspectors and other colleagues she works with who stand firm in doing what is right, and doing it right away – for you, and she has boxes full of references from clients who were more than pleased that they had hired her to “represent” them, whether they were buying or selling in Brampton.

Commissioning an Agent (from the Buyer’s point of view)

Commissioning an Agent (from the Seller’s point of view)

*This material is copyrighted by Carolyne Realty Corp. and may not be reprinted without permission in writing.


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©1998 by Carolyne Lederer PLEASE NOTE: this material is copyrighted by Carolyne Realty Corp. and may not be reprinted or duplicated in any form without the written consent of the copyright holder.