When a brokerage does double duty
I’m buying a home where the listing salesperson is from the same brokerage as my agent. Is there anything I should be concerned about?
When the buyer and the seller are clients of the same brokerage, it’s known as “multiple representation.” That’s the case even if you and the seller are working with different salespeople within the brokerage. That’s because when you sign a representation agreement as a buyer or a seller, you are entering into a contract with the brokerage, not the specific salesperson or broker that you are working with.
While multiple representation is relatively common, it’s still a matter that requires thorough disclosure by the brokerage and your written consent. You should carefully consider the situation before providing consent.
But before I get into the key issues, it’s important to note that multiple representation only applies when the buyer and the seller are “clients” of the same brokerage. If one of them is instead a “customer” of the brokerage, it isn’t considered multiple representation.
The difference between being a client versus a customer of a brokerage basically boils down to the duty of care as they guide you through the real estate transaction. The brokerage has a higher duty of care to clients than it does to customers. To learn more, the Ontario Real Estate Association has more information on its website.
Let’s assume a situation where both parties are clients of the brokerage. That means that the brokerage has an obligation to promote and protect the best interests of both you and the seller. There’s potential for a conflict of interest, so you can see how issues could arise.
For example, the brokerage would know about your budget, your offer strategy and other information that could be helpful to the seller during negotiations. Similarly, the brokerage would know about the seller’s sales strategy.
When a multiple representation situation arises, your brokerage must disclose to both parties that it proposes to represent more than one client. It must also explain to each party how the obligations imposed on the brokerage will differ compared to if they only represented you.
Typically the differences will relate to the sharing of information and the services that the brokerage will be able to provide to you. These disclosures should be made in writing to make sure everyone is on the same page. The disclosure must be made at the earliest practical opportunity — essentially as soon as possible after the multiple representation situation is discovered.
Most importantly, the brokerage must obtain written consent from both clients before it can proceed with multiple representation. If you or the seller decline to provide written consent, the brokerage must decide which client to keep, and release the other one to obtain representation from another brokerage.
It’s up to you to decide whether to proceed with multiple representation. Take your time and think about the potential implications before you make a decision. Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professionals in Ontario. Email questions to askjoe@reco.on.ca. Find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at youtube.com/RECOhelps.