Customers and clients treated differently
I’ve heard that there’s a difference between being a “client” and a “customer” of a real estate brokerage when you’re househunting. Aren’t they the same thing?
They may sound like similar concepts, but there are important differences when you’re a client of a brokerage, versus being a customer.
Under the legislation governing real estate professionals, the brokerage and its salespersons have a greater obligation to look out for the interests of clients.
If you’re a client, the brokerage and its representatives have a special legal responsibility to follow your instructions, protect your confidential information and promote and protect your best interests.
To become a client, you sign a Buyer Representation Agreement (BRA) with the brokerage. Before hiring a real estate brokerage, it’s a good idea to communicate openly with prospective reps about what kind of property you’re looking for, the services they will provide and the fees and commissions that you would be required to pay.
The BRA will have these items in writing, along with the date that the agreement begins and ends. It’s important to understand that a BRA is a binding contract and it is not subject to a “cooling off” period. The deal may also include a “holdover clause,” which may require you to pay the brokerage a commission if you complete a purchase of a property that the brokerage previously showed to you during a stated period after the agreement has ended.
Once you are under contract with one brokerage, you should avoid working with a second one because there can be significant legal and financial consequences. If in doubt, consider asking your lawyer.
If you choose not to sign a BRA, you can enter into a Customer Service Agreement (CSA) with the brokerage instead. As a customer of the brokerage, they will still help you buy a home, but they won’t have the same level of responsibility as they would if you were a client. The representative would still show you properties and help you fill out paperwork, but they wouldn’t necessarily provide advice and they aren’t required to promote and protect your best interests.
For example, for a client, a salesperson would research comparable properties and work with the buyer to define a strategy for the offer and the negotiations in order to get the property for the best price.
When working with a customer, the salesperson might not even suggest a price to offer, or might only identify a suitable price range.
Just as the brokerage will have less of a commitment to you under a CSA, you will have less of a commitment to the brokerage. Typically these deals are not exclusive contracts. You could also work with another brokerage at the same time.
Whether you are a customer or a client, the brokerage will still have to act fairly, honestly and with integrity and provide you with conscientious and competent service. Keep in mind that some brokerages may insist on a client relationship.
No matter which type of agreement you’re signing, you should take the time to read it and make sure you understand each clause. If you’re unsure about something, ask questions or consider seeking legal advice before you sign. 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.