On June 15, 2018, the Office of the Superintendent or Real Estate (OSRE) implemented a new set of rules which Realtors must adhere to and new forms to use. These new forms replace the old Working With a Realtor (WWR, highlights added) form which was used in the past.
After working with the new rules and forms for 6 months I decided to post this blog to explain things in more detail as the OSRE did little to educate the public.
This is a long post as the changes fundamentally changed how we work with consumers.
The new rules, or procedure, has change the information we give consumers, hopefully making things a little clearer. Which is a positive change in my opinion. The big change for consumer is when and how we provide that information, plus the elimination of dual agency, where a realtor represents both the buyer and sell. This has not been well received by some and I comment on it further at the end of this blog.
The reasons for the changes are threefold.
- With the elimination of dual agency, where a Realtor represents both the buyer and seller, the first page of the old WWR needed changing. This form has been replaced with several other forms.
- OSRE also wanted the consumer to be better informed about the different relationships (client or unrepresented party) so that they could make better decisions.
- The term "Customer" in the old WWR has been replaced with "Unrepresented Party" and the new forms go into more detail explaining this relationship so consumers have a better understanding. If consumers choose an unrepresented party relationship, there is an additional form that explains this relationship and risks further.
In understanding these changes it is helpful to know that agency law is common law, which means that there does not need to be a written agreement for an agency relationship (client/agent) to exist. If two people are acting as a client and agent, then an "implied" agency relationship exists. This agency relationship, while not written, places the same duties and responsibilities upon the Realtor (agent). As a Realtor, if I receive personal information from you such as your motivation for buying or selling, financial or personal information and/or I give you advice, then there is the potential that an agency relationship exists. Under the new rules we must avoid this with unrepresented parties.
Therefore, according to the new rules we Realtors must establish as soon as possible if we have a client relationship or an unrepresented party relationship as the type of relationship does affect what we can do for the consumer.
The main change for consumers is that when you first meet with a Realtor you will likely be asked to complete at least one of these forms. It is a little like walking onto a car lot and having the sales person come out with a clipboard with a form for you to sign before they will talk to you. Having said that, I do believe the changes are positive overall and the consumer will be better informed and protected. It will just take some time to get used to the new procedure.
It is important to note that a consumer can have a client relationship with more than one Realtor. None of the new forms include an exclusive client/agent relationship. Signing the form identifies the type of relationship, it does not mean that you are committed to work with that Realtor. You are the consumer, who you work with is your choice, you can even change if you would like. I completely understand that part of buying or selling a home involves finding a Realtor that you are comfortable with. To reinforce that, I also give my consumers a letter that they can sign at anytime if they would like to end our client/agent relationship.
Here are the forms that will most likely be used.
1. Disclosure of Representation in Trading Services: This form needs to be provided to everyone who is interacting with a Realtor in order to clearly define what a Realtor can do for the consumer. The form outlines the duties that a Realtor owes to a client as an agent. It also notes that these duties do not apply if the consumer chooses to be an unrepresented party. This does not need to be filled out at an open house unless you start asking questions the answer to which would create an agency relationship. This form mostly communicates the information on the old WWR, but misses a few items that I cover in a letter that I also provide including:
- You can sign this form and have a client relationship with more than one Realtor.
- Realtors owe a duty to their clients to use "reasonable care and skill." While this term may sound somewhat undefined, it actually is a well established legal term. Realtors are expected to follow the rules, our code of conduct, the Real Estate Services Act and the guidelines in our Professional Standards Manual.
- We Realtors are expected to follow all legal instructions of our clients. In other words, we work for you.
- Our duty of confidentiality to you lasts forever, it does not end when the relationship ends.
2. Disclosure of Risks to Unrepresented Parties: If a consumer chooses to be an unrepresented party this form goes into more detail about what a Realtor can and cannot do for you. In a nut shell, the Realtor can provide general information but cannot offer an opinion, provide advice, negotiate on your behalf and the Realtor must not receive any personal or confidential information from you such as financial, motivation for buying or selling or price and terms that would be acceptable to you. They can provide standard contracts and other documents, and fill them out at your direction. They cannot advise or suggest what to put in the contract such as price, deposit, dates, included items and subject to terms (financing, inspection, insurance, title and many other special terms). This from, and the Realtor, will advise you to get independent professional (legal) advice.
- I have done this with the buyer being my client and the seller being an unrepresented party as a for sale by owner and it was workable. The buyer and I put together the offer and the sellers let me know what changes they would like to see without input from me. In this situation the sellers were advise to seek their own legal council. As they were selling on their own they were prepared to be unrepresented and had already decided not to avail themselves with the advice and expertise of a Realtor. Acting for the buyer I was able to manage the process through to completion. After working with the process for six months, this is the only situation in which I would be comfortable working with an unrepresented party.
I see real problems with working with an unrepresented buyer. Firstly, when I show a listing, or a property, I often see things
that I bring to the buyer's attention as potential issues to consider, as well as positive factors. I have difficulty imagining showing a place without saying anything.
Secondly, there is the matter of the offer. One of a Realtor's prime duties is to write enforceable offers that adequately protect their client. For that we have training, pre-written documents and terms to choose from, plus experience. In this scenario I am expected to write the offer at the direction of the buyer. What if a term they are suggesting is not enforceable, or they are not including an important term? Am I to say nothing and watch them make mistakes? Potentially causing them financial loss and other difficulties. If I do advise them, then I am in an agency relationship with both parties which is a conflict of interest. I get paid for my knowledge, skill and expertise to ensure my client's interests are protected. Getting paid while not doing that does not sit well with me.
Thirdly, occasionally matters come up after the offer is accepted that need attention and agreement between the buyer and seller. The inspection may turn up something that needs addressing, zoning or building permit issues can arise, or an offer subject to the sale of the buyer's current home has some additional complexities. Again, am I to offer no advice?
Where this scenario is likely to arise is when a Realtor has a listing and a buyer, new or old client, is interested in the property. Having the buyer being unrepresented would allow the Realtor to retain both commissions, similar to the old dual agency. For myself, I would likely refer the buyer to another realtor for the reasons above. The offer starts with the buyer and unless the buyer is very familiar with the process, it would be in everyone's best interest for the buyer to have some assistance from their own Realtor.