Real Estate Talk:
For who does a broker work?

Clarification on who the selling broker and listing broker represent and their obligations

By Joseph Marovitch

A buyer, not represented by a selling broker (broker representing a buyer), visits a property represented by a listing broker (broker contracted to sell property). The rule is that the broker who is the effective cause of sale is the broker of record who prepares the promise to purchase. This means that, unless the buyer is accompanied by a selling broker or if the buyer states to the listing broker that they are represented by a selling broker, the listing broker is the broker for both the buyer and the seller.

If the buyer visits the house and is not represented, the listing broker, using ads and signs, brought the buyer and therefore is the effective cause of sale.

If the buyer’s selling broker found the property on Centris and introduced it to the buyer, then arranged a visit, the selling broker is the effective cause of sale.

… unless the buyer is accompanied by a selling broker or if the buyer states to the listing broker that they are represented by a selling broker, the listing broker is the broker for both the buyer and the seller.

Many times, a buyer, not represented, will visit a property and decide to make an offer. They will then ask the listing broker to prepare a promise to purchase with the assumption that the listing broker is working for that buyer, however, this is not the case.

The listing broker’s first obligation is to the seller they have a contract with. The listing broker’s objective is to create as much interest in the property as possible and attain a purchase price as high as possible. The listing broker must be fair with both the buyer and seller, but the priority is the seller, not the buyer.

The selling broker, on the other side, represents the buyer only. The selling broker’s objective is to purchase the property for their buyer at the lowest price possible with the most protection in terms of financing, inspection and deadlines.

In a new directive from the OACIQ, the governing body for real estate brokers, a listing broker is supposed to indicate to a non-represented buyer that their priority in the transaction will be the seller. This admission can sway the buyer to attain representation from another broker. The broker the buyer attains may be reluctant to represent the buyer since the selling broker, attained after the fact, not being the effective cause of sale, may not get paid for their services or may be paid a smaller amount at the discretion of the listing broker. Therefore, a buyer should attain selling broker representation before shopping for a property.

Note that in a transaction where the listing broker represents both the buyer and the seller, the listing broker will receive a full commission as payment for their services. In a transaction where a selling broker is involved, the listing broker must split their commission.

‘In a new directive from the OACIQ… a listing broker is supposed to indicate to a non-represented buyer that their priority in the transaction will be the seller.’

One last note, the listing broker is paid for their services by the seller. The selling broker is paid for their services by the seller as well. The buyer only pays for the property at the amount agreed to and negotiated by the listing and selling brokers.

In summary, the listing broker represents their client, the seller. The listing broker markets the seller’s property, negotiates offers and facilitates the inspection, mortgage broker and notary for the seller.

The selling broker represents the buyer. The selling broker finds the properties based on the buyer’s criteria, performs a market analysis to make sure the asking price is fair value. The selling broker negotiates as low a price as possible with the required conditions, facilitates and represents the interest of the buyer with the inspection, mortgage broker and notary.

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State of the market

The market is moving, the buyers are serious and the sellers are few. Inventory and interest rates are low and a seller’s market continues. The only problem is we are in the 2nd wave of COVID infections and the city is in lockdown again for 28 days and perhaps longer.

With a 2nd wave, there is no telling where the real estate market will end up. If lockdown remains too long and businesses remain closed, incomes will decrease, inventory will decrease even more and we will come to a standstill. However, a trend may occur as before. Suppressed buyers will come out after lockdown ends and the buying frenzy will repeat.

‘The market is moving, the buyers are serious and the sellers are few. Inventory and interest rates are low and a seller’s market continues. The only problem is we are in the 2nd wave of COVID infections and the city is in lockdown again for 28 days and perhaps longer.’

The downside is that, if this is the trend, people will be infected and deaths will occur. It would be better if the market stabilized by lowering the curb of infection and taking precautions.

This week coming, hundreds of geniuses will march again in protest of wearing masks. This group will march without masks, spread infection and keep the pandemic blooming. Since this is a matter of life and death, it might be a good idea to arrest these people and throw them in a room together at, say, the Montreal General Hospital, where they can spend a month proving the experts wrong?

As well, while we are at it, how about masking students in classrooms so they do not bring infections home to their parents and siblings?

How about that presidential debate, huh? The world is not boring, is it?

Have a great week, stay safe!

Let’s not forget that people with cancer are vulnerable too!

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Other articles by Joseph Marovitch