Changes Coming To Multiple Representation

New RulesReal estate agents represent seller clients through Listing Agreements, and represent buyer clients through Buyer Representation Agreements. These contracts obligate real estate agents to:

  1. Always work in the best interests of the client;
  2. Protect the confidentiality of the client’s personal information;
  3. Disclose all information that could affect the client’s decisions; and
  4. Carry out the client’s (legal) instructions.

It is not uncommon for a real estate agent to represent both the seller and the buyer, for example, when an unrepresented buyer visits an open house and asks the listing agent to represent him in making an offer. This is called “multiple representation”. While there is obviously a conflict of interest between the buyer (who wants the lowest possible price) and the seller (who wants the highest possible price), this practice has been accepted as long as both the seller and buyer consent and understand that the usual agent obligations are restricted in two ways:

  1. The agent can no longer represent the best interests of either client over the other and must be a neutral ‘mediator’ in negotiations; and
  2. The agent cannot disclose personal information about either client to the other and, specifically, cannot advise what the buyer should offer nor what the seller should counter-offer.

Why would the seller and buyer agree to multiple representation?

Firstly, because there is no second agent to ‘share the commission’, the listing agent may offer to reduce the commission, and this can result in a better result financially for both buyer and seller (not to mention the real estate agent).

Secondly, when there is the possibility of a bidding war on the property, the buyer may hope to obtain ‘inside information’ from the listing agent about other offers to improve their chances of winning the competition. While it is strictly forbidden and highly unethical for the listing agent to share any such information, there is a large temptation to do so in order to ‘double end’ the transaction, that is, to get paid the total commission instead of just half. This is especially so since it is very difficult to prove that such a violation has occurred.

A recent hidden camera investigation by Marketplace caught several real estate agents blantantly breaking the rules in this way, and has served as a catalyst encouraging the government to change the governing legislation (Real Estate and Business Brokers Act, or REBBA) regarding multiple representation. While the details have not yet been finalized, it is likely that real estate agents will no longer be allowed to represent both the buyer and the seller. This will mean that buyers will no longer have any incentive to ‘do it themselves’ to save money (indirectly) on commission or to get an inside track in a bidding war. Buyers will therefore be more apt to sign up with a agent to represent them, as they will get all the advantages of representation at no extra cost versus going it alone. The new legislation will like be in place early next year.