Real Estate Talk:
Client-broker etiquette

An update on the rules to be followed between brokers when selling real estate

By Joseph Marovitch

Updated March 6, 2024

There were rules brokers used to follow when selling property. To understand these rules, one must know the difference between a listing broker and a selling broker.

A listing broker is the broker who is selling/marketing the property to attract buyers. A selling broker is a broker who brings a client/buyer to visit the property that the listing broker is selling.

When a buyer enlists a selling broker to find a property for them and to perform the paperwork, evaluation, negotiation and facilitate the notary, mortgage broker and inspector, the selling broker used to explain to their client that should the client visit an open house, they must inform the listing broker that the buyer has a selling broker who is representing them.

Also, should the buyer find a property they like via newspapers or the internet, the buyer would inform their selling broker and allow the broker to arrange the visit.

The selling broker is required to have a buyer’s contract that enables their commission to be paid by the buyer, or make an arrangement whereby the listing broker’s agency would pay the selling broker’s commission.

If the buyer, who is represented by a selling broker, did not inform the listing broker at an open house, or if the buyer arranged a visit and did not inform the listing broker that the buyer was represented, the listing broker would assume the buyer is their client. As such, the listing broker would not be obligated to pay the selling broker, who comes after the fact.

Today, it is not the same. The selling broker is required to have a buyer’s contract that enables their commission to be paid by the buyer, or make an arrangement whereby the listing broker’s agency would pay the selling broker’s commission.

Should a selling broker work with a client without a buyer’s contract, there is no obligation on anyone’s part to pay the selling broker’s commission.

Further, if a buyer, who is not represented by a selling broker, should indicate interest in a listed property and either arrange a visit or show up at an open house, the listing broker is required to suggest the buyer acquire the representation of a selling broker. This means that with a buyer’s contract, the selling broker is now part of the negotiation and has a right to commission as well.

‘Should a selling broker work with a client without a buyer’s contract, there is no obligation on anyone’s part to pay the selling broker’s commission.’

Also, the listing broker, after suggesting the buyer acquire representation, must inform the buyer that they can only represent the seller and not the buyer. If the buyer refuses to get a selling broker to represent them, the listing broker must have proof that the buyer refused to acquire representation in the form of a signed document or acknowledged email.

Finally, the listing broker can prepare offer documents for the buyer but cannot advise the buyer or provide information, such as comparable listings, to see if the price is fair.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: Why brokers require exclusivity in the brokerage contract

State of the market

Bank of Canada interest rate: 5 %
Canadian prime rate: 7.2%
Canada inflation today: 2.9 %

The real estate market is picking up with increased sales and inventory. Market values appear to be rising. There is demand busting at the seams with perceived optimism.

The Bank of Canada again announced the Fed rate will remain at 5%. It has caused optimism that the Fed may lower rates this year. This atmosphere has emboldened banks to lower their lending rates to the 5% to 6% range.

‘The real estate market is picking up with increased sales and inventory. Market values appear to be rising. There is demand busting at the seams with perceived optimism.’

There is no certainty that the Fed will lower the rate as this depends on geopolitics, meaning will governments stabilize, will war in the Middle East and Ukraine de-escalate, will the environment improve or worsen? These are all the determining factors for interest rates to improve. If a buyer can acquire a low mortgage rate now, they should take it because we just do not know what is coming. We can work with what we know to be currently certain or gamble with the future.

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Read also: Other articles by Joseph Marovitch