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Dual agency do’s and don’ts

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Having the same agent or same brokerage represent both the buyer and seller in a real estate transaction can get confusing. Because multiple representation isn’t always fully understood by buyers, sellers and even agents, the situation can lead to misunderstandings, at best, or worse, legal liabilities. The potential for a conflict of interest is inherent when one person or firm represents both sides of the transaction when there’s a dual agency involved. For that reason, the disclosure of the dual agency relationship is integral. As a result, there are many rules and regulations around the use of dual agency in real estate transactions – and some key do’s and don’ts.

Here is a few dual agency do’s and don’ts for real estate agents and tips for buyers and sellers.

DO #1: Be upfront about the multiple representation situation

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Any agent or brokerage that represents both the buyer and the seller must notify both parties in writing. But notification isn’t enough. The agent or brokerage must also explain how this impacts the advice and representations offered to both clients.

Once the buyer and seller have agreed in writing, the agent involved in the multiple representations must keep all information not directly stated in the listing documents or the agreements private. This means the agent cannot say anything to either client that may hinder either party’s bargaining efforts.

DO #2: Represent both sides equally

For example, an agent representing a seller cannot share why a person is selling the home, nor can they divulge the lowest price the seller is willing to accept. When representing the buyer, the agent cannot tell the seller how much the buyer is willing to pay or the reasons for buying. In short, the agent cannot give information to either party that might result in an unfair advantage for either the buyer or the seller.

DO #3: Disclose all material facts about the property

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By law, the seller and the Realtor representing the seller must disclose all material facts, including latent defects, known about the property. This requirement doesn’t disappear just because an agent also represents the buyer.

DO #4: Answer the buyer’s questions

Quite often, there is an assumption that the buyer can no longer ask the seller, through the agent, any questions about a property, but that’s not quite true. Because an agent must be rigorous in how they conduct themselves in a multiple representation agreement, it’s best to advise buyers to put all questions in writing. The agent can then forward those questions to the seller, who then provides the answers in writing. By keeping everything transparent and a little more formal, the agent avoids any misunderstandings and ensures they represent both clients fairly and accurately.

DO #5: Explain real estate terms and closing costs and procedures

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The agent working in a multiple representation agreement must perform the work of both the buyer’s agent and the seller’s agent. This means explaining the process to both clients and advising them on what each term means and what procedures to expect next.

DO #6: Work diligently to complete the sale

It’s important that the Realtor continues to work diligently to complete the sale, even after the purchase agreement is accepted. Quite often, buyers and sellers will need guidance on next steps or how to prepare for the next phase. Remember to keep in contact with both sides of the transaction to make sure the sale goes through smoothly.

DON’T #1: Discuss personal matters

We all want to know why a homeowner is choosing to list their home for sale. Sometimes this information slips accidentally (not good!) and sometimes the seller doesn’t care if anyone knows. But for an agent representing both the buyer and the seller, it’s absolutely integral to stay quiet about reasons and motives of either party.

DON’T #2: Discuss top dollar

Never disclose the lowest price a seller will accept or the highest price a buyer will pay. While this is true in any real estate transaction, it’s critical in a multiple representation situation, as it would go against the fiduciary responsibility you have to look out for your client’s best interests.

DON’T #3: Blindly obey a client’s instructions

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While an agent has a number of obligations to their clients, this does not mean they are required to hide material facts or deny latent defects about the home. For instance, let’s say a seller mentions that they don’t want pictures taken of the basement because they have not yet painted over the water stains from the last flooding. It is now up to the agent to notify the seller of the law: That all defects and latent problems of the home must be openly and honestly disclosed. This doesn’t mean the agent has to prevent the seller from painting, but the agent must gently help the seller see that the information about flooding must be disclosed to any potential buyer. Remember, honesty is crucial to the integrity of your profession as well as the industry’s reputation. Our ability, as agents, to attract clients that trust our expertise depends upon our ability to be honest and to act with integrity.

When to be a dual agent

The ability to represent both sides of a real estate transaction is not legal in all provinces and states. For that reason, it’s essential to first determine whether or not an agent can act as a dual agent. For instance, as of June 15, 2018, the dual agency will be banned from virtually all residential real estate transactions in British Columbia. While B.C. is currently the only province to introduce a ban on multiple representations, there are discussions that Ontario may follow suit.

For now, however, all other provinces in Canada and many states in the U.S. allow for multiple representation but only if the agent informs both sides that they are facing a dual agency scenario — and there is no legal deal without all parties informed consent. While it may advisable for each side to get their own, independent representation there are situations where using a dual agent makes sense. Keeping dual agency do’s and don’ts in mind will protect both parties in the transaction.

In transactions where the Realtor simply facilitates the exchange of documents, then opting for dual agency may help simplify and speed up the transaction. For example, in a commercial real estate sale where both the buyer and seller have their own legal representation, then the Realtor’s role may be more transactional. Another example is when a buyer and seller have struck up a deal and already negotiated the terms, price, and conditions and all that’s required is someone to oversee the paperwork. (Hint: This is also a case where you may want to ask for a lower commission since so much of the deal is already ironed out.)

In virtually all other cases, it’s probably a good idea for the buyer and seller to obtain independent representation, where possible, or at least individual representation (where each agent works for the same brokerage but only owes a fiduciary responsibility to their client).

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Romana King

Romana King is an award-winning personal finance writer, real estate expert and the current Director of Content at Zolo. Romana has contributed to business and lifestyle publications including, Toronto Sun, Maclean’s, MoneySense, Globe & Mail Custom Content Team, and The Toronto Star. Among her achievements, Romana won silver for her annual Where to Buy Now real estate package in the 2019 Canadian Online Publishing Awards. In 2015, she won a SABEW Business Journalism award. When she was editor of CI Top Broker, Romana helped guide her team to obtain its first KRW Business Journalism nomination, and in 2011, she was part of a small team that helped MoneySense win Magazine of the Year at the 34th annual National Magazine Awards.