Buyer Agency #224
CATEGORY: Legally Speaking
TAGS: Agency Disclosure Canadian Real Estate Association (CREA) Real Estate Errors and Omissions Insurance Corporation (REEOIC)
By Gerry Neely
The launch of the good ship, SS Agency Disclosure, is underway and there is no turning back. She left port comfortably ahead of any potential government interest in legislating adequate agency disclosure and is now moving on the flood tide of the legal and ethical requirements of CREA and the courts. The success of her voyage depends upon how well the licensees in the province, as her crew, absorb the information they will receive over the next few months concerning agency disclosure and the introduction of buyer agency.
On the latter subject, some licensees have grasped eagerly the advantages of buyer agency and are putting it into practice, without first learning the responsibilities that accompany the relationship between buyers and their agents. The purpose of this column is not to discourage anyone from embracing buyer agency, because among its advantages are those referred to in column #221, but to remind licensees who may be advertising their services as buyers' agents for a flat fee, that the responsibilities they assume may mean that they have sold themselves short.
To use the metaphor of the sea again, no captain confidently sails for a distant port without charts or other navigational aids. Similarly buyers' agents should know that the duties they will owe to buyers are essentially the same duties they now owe to sellers: fiduciary duties of trust, loyalty and confidentiality, full disclosure of facts that are or should be within their knowledge which might affect the value of the property being purchased, to provide reasonable advice and to be prepared to prove that these duties have been complied with. From these general duties to the more specific, it is obvious that the obligation to the buyer is to obtain the lowest price and the best terms possible, having regard to the buyer's circumstances and the market. That means an analysis of comparable properties done as professionally and prudently as any analysis done for a seller intending to list property for sale.
The August newsletter of the Real Estate Errors and Omissions Insurance Corporation contained the advice that selling salespeople must remember that they cannot always rely on the listing salesperson to provide them with accurate information. This advice is doubly true for buyers' agents who will have to satisfy themselves as to the accuracy of the information provided to the seller or the seller's agent.
Searches of title may be required. Information, whether in the listing provided by the seller or seller's agent, or in the Property Condition Disclosure Statement or elsewhere may need to be verified. This listing of specific duties cannot be exhaustive and if you have a checklist for what you now do for sellers, examine it to see how it will apply when you act for buyers.
The importance of buyers' agents contracts cannot be underestimated. Licensees will have to be very familiar with the advantages of buyers agency, if they are to persuade a public accustomed to the present system, that there are advantages to a prospective buyer signing a buyer agency agreement to purchase property. These contracts will establish the basis for payment of commission
Some of these obligations may be modified by the terms of a buyer's agent contract. For example, a buyer may agree by the contract to rely upon the buyer's physical inspection of the property together with any home inspection services report, to verify the accuracy of the information concerning its physical condition which is provided by the seller or the seller's agent.
One lesson we may learn from what happened following the introduction of buyer agency in the United States, is the need to maintain the cooperation and civility among members of a board which has made the Multiple Listing System® so beneficial to the public and to licensees.In some states, individual salespeople or brokers adopted an adversarial approach to licensees acting for buyers. Either no commission split was offered or a different and smaller commission in the split offered to sub-agents was offered to buyers agents. Competitiveness is healthy, but competition rather than combativeness is the aim if the MLS® system and its benefits are to be maintained.
And remember the motto of the SS Agency Disclosure is, "make port not court."
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