Having a Realtor represent you in a transaction is a vital first step when buying a home. Aside from all the Fiduciary Duties that a Realtor must provide to you according to Law, the list is endless as to why it is a key first step. For most people, when buying a home; it’s the most significant investment decision of their lifetime, it is critical that they are advised accordingly. Hopefully once you have finished reading this article you will agree with my sentiment.
Let’s start by discussing relationships and with whom they may pertain to. A buyer’s agent when agreed and signed under buyer representation is now working solely for the buyer and the buyer’s interests only. He/she cannot disclose any information to the seller nor to the seller’s agent. This rule also applies to the seller and their representative.
Let’s use a scenario to better explain- assume that you drive by a home that interests you, and you decide to call the listing agent. Do you believe that you are making an error by doing so? It’s not just an error, it is a huge blunder! Allow me to explain, with whom does the listing agent have to be loyal to under law? And not only loyal but who also has a business relationship with? Yes, with the seller and NOT YOU! The public has a misconception that they will be able to negotiate a better purchase price if they choose to deal directly with the listing agent, that’s a big lie. Price and commissions work hand in hand, every single expense that the seller will incur is actually included in the price of the home which also includes agent’s commission. I’ll give you another example- have you read an advertisement from an automobile maker? “Finance or lease a brand new xxxxxx for 0% interest for 36 months”? Do you really believe that the finance company isn’t going to charge you any interest? If you do, then you are very gullible. The interest is incorporated into the price of the vehicle over the term of the lease or finance.
For those who believe that the listing agent will cut their commission to sell the house is absolutely incorrect, top producing agents that do the bulk of the business in Toronto would rather have another agent sell the house as opposed to themselves. Why you ask? Because the longer the house sits (within reason) on the market- the more qualified leads they will generate. Yes, agents use your home to find future business. Sad but true, your home that has just been listed is an agents greatest marketing tool.
There are other benefits to the buyer such as- guiding the buyer through the process, scouting and pre inspecting properties that match the home buyers criteria, mortgage pre-qualification, experience of negotiating the best price and terms on their behalf, having other professionals at their disposable if need be. These are just a few of the many things that a buyer agent brings to the table.
Realtors have not only fiduciary duties to their clients, but also various professional and ethical obligations on them. Realtors must maintain proper records, not disclose confidential information, act competently and in good faith, and be loyal and obedient to their clients. Acting in good faith requires Realtors to be honest, promote their client’s best interests, and disclose conflicts of interest – either real or perceived – to their clients. Here are some of those fiduciary duties;
Accounting- The brokerage must provide details of all funds held in trust and maintain accurate book keeping.
Confidentiality- Maintain confidentiality and not disclose confidential information for any purpose.
Competence- Must be knowledgeable to transact in real estate transactions, exercise reasonable care and make its best efforts to avoid having the principal act on misrepresentations or fraud.
Good Faith- The brokerage must be honest,[promote and protect the best interest of the client, disclose facts about the property which would be relevant to the principal’s decision in buying or selling the property and disclose in writing to the client if they representing multiple parties.
Loyalty- place the interests of the principal above all else (except the law – which means they cannot help them commit a crime, for example), help to promote and protect the interests of the principal at all times and considering the bests interests of the principal and disclose a conflict (actual or perceived) between their and the principal’s interests.
Obedience- Follow their clients instructions regardless if they agree or not.
With all the homes in Toronto for sale to pick from and with all that buyer representation has to offer, why would a prospective buyer choose not to be represented? Some readers may have the opinion that this article is biased because I’m a Realtor, I say- all that is written is logical and common sense.
If you agree or disagree with the opinions expressed in this article, then please comment and tell us why!