BUYER: So how much do you think we should offer on this home?
REALTOR: Well, the seller is asking $800,000. So I guess you should pay $800,000.
BUYER: What? I don’t understand. Aren’t you supposed to help me?
REALTOR: You do know that I work for the seller, don’t you?
BUYER: But this isn’t your listing.
REALTOR: You’re right. However, I work for the seller until such time as you tell me to work for you!
Clearly this is not the exact nature of a conversation that our team would have with a purchasing consumer however it is at the very core of Buyer Rep and why it is one of the most misunderstood documents in the Real Estate industry today.
A Brief History of Real Estate Transactions
Imagine for a moment an employee – employer relationship. Who is the Employer? That would be the person who pays. And who is the Employee? Naturally, the individual providing the service to warrant a pay cheque from the Employer. And in a Real Estate sale, the seller pays the commissions so by rights the seller is the Employer. By nature of any working relationship, the Employees work for the Employer. Realtors work for the Seller.
For many years, there was no such thing as a Buyer Representation. The seller would hire a Realtor to list and sell a property. The Realtor would expose the property to the market and the Realtor would sell the property. Ontario law was clear for decades. The Realtor owes all obligation to the Seller to secure the best possible price. The MLS was created to allow the listing Realtor to expose the property to as many other Realtors as possible and increase the chances of a successful sale. Realtors from competing Brokerages were provided access to the listing to further help the seller obtain a sale. However, ALL Realtors in the transaction worked for the seller. This core principle of a real estate sale clearly created an unfair playing field.
RECO (The Real Estate Council of Ontario) sits on the side of the consumer. They are the consumer watchdog and advocate. Any new rule or change in Provincial Legislation impacting Real Estate in Ontario is proposed by RECO. And for the most part, all Legislative changes made to the Real Estate and Business Broker’s Act are in direct response to consumer complaints. Clearly, the traditional relationship of all Realtors working for the Seller was not in the best interest of the consumer and, as such, RECO proposed Buyer Representation; the Government passed the law; and Buyer Rep was born. The consumer spoke; the industry watchdog heard; and laws were created to level the playing field.
What does this mean for you?
You now firmly have someone taking care of you in a Real Estate Transaction. Fiduciary obligation shifts from taking care of the Seller to now taking care of you, the Buyer. One of the most significant value propositions of a Buyer Representation is this simple fact – a professional Realtor now owes you a level of performance that previously did not exist.
- We are obligated to show you all properties that match your criteria irrespective of compensation.
- We are obligated to protect your best interests at all times.
- We are obligated to protect your money as if it was our own.
- We are obligated to follow all your lawful instructions.
- We are obligated to protect your privacy.
These are only a few of the key components of Fiduciary Obligation. Suffice it to say, that you, the Buyer, now have little, if anything, to lose given a Realtor’s actions and conduct are so stringently enforced by Provincial Law.
My friends told me never to sign a contract
We live in a world of instant communication and 'fake' news. The speed with which bad news now travels is unprecedented. Everyone knows someone who has had a bad experience with a Realtor. And I will be the first to admit that our industry is filled with unethical and greedy individuals who care only for the resulting commission cheque in a sale. Some in our industry will say or do pretty much anything in the interests of a deal. So yes, your family and friends are absolutely correct in protecting you. They are well meaning and often your first source of information when making a decision about hiring a Realtor.
Buyer Representation Myth-Understandings
I’m Locked Into A Contract
Buyer Representation is simply a formal recognition of a Realtor hard at work for you and your goals. When you hire a lawyer, for example, the lawyer generally will request that a formal contract be signed and an up-front retainer be paid in advance of any services rendered. A Buyer Rep is merely the formal contract AND you get the services of a Realtor for free until you close on a sale. In this way, the Realtor has a vested interest in ensuring you receive the highest level of service. The Agreement is signed for a specific length of time and this can vary from only 1 day and for a specific property; to a few weeks or a month; and in some cases, depending on how specific the property, for several months. It is entirely up to you. If you are interviewing more than one Realtor, ask them if they provide a Customer Service Guarantee. We certainly do. We want all our clients to tell everyone one they know how great we are, and this means ensuring we are delivering the very highest level of service always.
I Have to Pay – Even if I Don’t Buy a Home
The Buyer Representation clearly outlines the Realtor’s fee structure. And it does clearly state that the compensation is owed for the purchase of any property. Where this gets complicated is when a Realtor works for months with a buyer, shows them dozens of homes, and then the buyer purchases a home from a builder or a private seller who is not paying any commission. Is the Realtor still entitled to be paid? Officially, yes. They did provide a service and as such are entitled to be compensated for their time and efforts. However, most realtors differ in the application or enforcement of this portion of the Agreement. This is where a very clear understanding must be set out from the start of the relationship. I cannot speak for how other Realtors handle this situation when it arises. Our team’s consultative process with a buyer is very clear BEFORE any document is signed. And we address these unique situations prior to commencing any work with a client. Will we hold a consumer hostage for a pay cheque? Absolutely not. Our goal is always to ensure that every Real Estate transaction is win-win and always with the long term healthy relationship with the client being our primary objective.
How Our Team Works For You
Our process is rather simple. We will meet with a prospective client at our office and conduct a thorough Buyer Consultation. Knowing how we serve your goals is the very first step in building trust with our clients. It is at that first meeting that we will outline the Working With A Realtor form and the Buyer Representation Agreement. If we are ready to get going, we sign these two documents right away and secure the highest level of service and obligation for you.
If there is any hesitation on your part, we would set up a preliminary tour of homes based on your criteria and commence what I refer to as ‘our first date’. We fully understand that there may be hesitation or reluctance on your part so our next step is to clearly demonstrate how we will serve you by conducting a brief tour of the top 4 – 5 homes that would match your criteria. We want you to feel comfortable in your relationship with us and demonstrate to you our thorough knowledge of product and the market. Sometimes, the ‘first date’ is really the only way to illustrate this for you. And when that tour is over, we will always ask if you are ready for us to start working for you!
Ultimately, whether you sign or do not sign a Buyer Representation Agreement is your decision. As Realtors, we are obligated to define what your relationship is with a Realtor via the Working with a Realtor form; and then present you with a signed Buyer Representation Agreement at the first practicable opportunity. If you choose not to sign this Agreement, understand that how a Realtor works for you and what a Realtor can or cannot say changes substantially. Know your rights; do your due diligence; and proceed with accurate information.
Signing a Buyer Rep is one of the wisest things you can do when working with a reputable Realtor. We truly do have your best interests front and centre at all times. Ours is a business of relationship. The successful sale of a home for you and your family is merely the serendipity of building a quality relationship with you.
We look forward to serving your goals and your best interest. Put us to work for you and we are confident that by the time you move into your new home, all your family and friends will know what a raving fan you are of our team!