Regardless of market conditions, real estate transactions can be a challenging, emotional process for both Sellers and Buyers, yet it need not be that way. As covered in my prior post titled “Trust In Real estate Services Act 2020 – Part 1,” new provincial legislation comes into affect on December 1, 2023. The “Trust In Real Estate Services Act 2020” (TRESA for short) contains many changes that will affect both consumers and REALTORS.® With over 20 years of experience it is my personal belief that the forthcoming changes are both positive if not long overdue. With the implementation of TRESA, real estate consumers whether they are Sellers and Buyers will receive better, more competent and trustworthy services with the REALTOR(S) they choose to engage with.
In Part 1 of this blog I addressed the role of being a client versus as customer in the real estate transaction. In Part 2, I am going to address the issue of “Multiple Representation” wherein the same Brokerage and its Agents represent both the Seller(s) and or the Buyer(s) in the same transaction.
What Establishes “Multiple Representation” in a Real Estate Transaction?
The most common situation for Multiple Representation is when the Listing Brokerage for a property listed for sale, has also entered into a “Buyer Representation Agreement” with a potential Buyer. As a result, the Listing Brokerage and the Agent(s) is representing both the Seller and the Buyer in the same transaction. Two important issues consumers need to be aware of are: (a) the Seller and Buyer must be aware of and give their written consent to Multiple Representation and (b) Multiple Representation applies even if more than one REALTOR® is involved in the transaction. This is not something that is new with TRESA. Multiple Representation in real estate transactions exists today however consumers are sometimes not aware of the situation or they simply do not understand the concept.
The following are three examples where Multiple Representation comes into play.
Example 1
ABC Realty has a listing at 123 Main Street and John Smith is the Listing REALTOR®. John Smith is approached by a Buyer interested in the property and said Buyer has entered into a Buyer Representation Agreement with ABC Realty to have John represent them. Both the Seller and the Buyer have been advised that this transaction is one of Multiple Representation where ABC Realty is representing both the Seller and the Buyer, what that relationship entails and both parties have given ABC Realty their written consent in this regard with John Smith representing both parties on their behalf.
Example 2
As in Example 1, ABC Realty has the listing at 123 Main Street and John Smith is the Listing REALTOR®. In this example, Mary Wilson another REALTOR® with ABC Realty is working with a Buyer with whom she has a signed Buyer Representation Agreement. Mary’s Buyer client is interested in John Smith’s listing at 123 Main Street and decides to submit an offer. Even though two different REALTORS® are involved in this transaction, the Brokerage is representing both the Seller and the Buyer hence as with Example 1 above, it is Multiple Representation. Once again both parties have given ABC Realty their written consent in this regard with John Smith working on the behalf on the Seller while Mary Wilson is representing the Buyer. Note: Although two different REALTORS® are involved, the Brokerage ABC Realty is still the entity representing both the Seller(s) and the Buyer(s) thereby creating the Multiple Representation scenario.
Example 3
As in Examples 1 and 2, ABC Realty has the listing at 123 Main Street and John Smith is the Listing REALTOR®. Cathy Brown and David Watson both REALTORS® with XYZ Real Estate have signed Buyers Representation Agreements with two different Buyer clients. Both Cathy’s and David’s respective Buyers are interested in John Smith’s listing at 123 Main Street. In this example, ABC Realty is no longer in Multiple Representation but XYZ Real Estate is as they are the Brokerage that is representing the two different Buyers for the same property even though it is listed with another Brokerage, ABC Realty. As with examples 1 and 2 above, both parties must give XYZ Real Estate their written consent to Multiple Representation with Cathy Brown and David Watson working on behalf of the two Buyer clients.
In any transaction such as Examples 1 and 2 above where a Seller(s) or Buyer(s) and involved and have given their written consent to the Listing Brokerage for Multiple Representation, The Listing Brokerage must be impartial and equally protect the interests of the Seller and the Buyer in this transaction. The Listing Brokerage has a duty of full disclosure to both the Seller and the Buyer, including a requirement to disclose all factual information about the property known to the Listing Brokerage that may impact a Buyer.. Factual information is anything that may impact a Seller’s or Buyer’s decision regarding the transaction. Good examples of this would be any known structural issues, a suicide or murder that took place in or on the property, was thew house use as a grow-op etc.
However, when a Listing Brokerage REALTOR(S)® are representing both the Seller(s) and the Buyer(s) they must remain impartial and equally protect the interests of both parties. While the Listing Brokerage has a duty of full disclosure to both the Seller(s) and Buyer(s), they shall not disclose any of the following:
- That the Seller may or will accept less than the listed price, unless otherwise instructed in writing by the Seller;
- That the Buyer may or will pay more than the offered price, unless otherwise instructed in writing by the Buyer;
- The motivation of or personal information about the Seller or Buyer, unless otherwise instructed in writing by the party to which the information applies, or unless failure to disclose would constitute fraudulent, unlawful or unethical practice;
- The price the Buyer should offer or the price the Seller should accept;
- And when as as the Listing Brokerage they shall not disclose to the Buyer the terms of any other offer from another Buyer;
Failure to abide by the above requirements has often lead to confusion, dissatisfaction and in some cases legal actions by consumers when a Seller or a Buyer interests have been compromised. Said legal actions can be against not only the Seller or Buyer but also against any REALTOR® that has failed to follow these established guidelines.
In summary, the new “Trust In Real Estate Services Act 2020” is not eliminating Multiple Representation as it was in British Columbia and as some in Ontario had thought. Among other things, changes brought forth with TRESA are aimed at ending any misrepresentation and or other issues that compromises both Seller and Buyer consumers when Multiple Representation is in affect.
The implementation of TRESA also addresses a new element in the real estate transaction that being those situations where either a Seller or Buyer choose not to be be represented by a REALTOR®. An example of this would be homes that are “For Sale By Owner,” commonly referred to as FSBO’s. Under the new TRESA legislation, any consumer Seller or Buyer that has chosen not to be represented by a REALTOR® will now be defined as being a “Self-Represented Party.” More on this in my next blog post titled: Ontario’s “New” Trust In Real Estate Services Act 2020 – What You Need To Know Part 3