Real Estate Talk: How selling brokers work with buyers

Selling brokers must follow specific rules when working with listing brokers and buyers

By Joseph Marovitch

September 5, 2024

As of June 10, 2022, real estate brokers in Canada can no longer represent both the buyer and seller in a transaction due to the conflict of interest such situations cause. If the listing broker is working for the seller, they are not permitted to provide information and protection to the buyer since they can influence the sale in their favour.

The seller must be represented by a listing broker who serves their interest only. The buyer must have the same –  a broker who represents the buyer’s interest only.

With this new law, the brokers, especially the selling broker representing the buyer, must follow specific rules when working with the listing broker to receive compensation for their work. Otherwise, it is difficult for buyers to be represented.

… real estate brokers in Canada can no longer represent both the buyer and seller in a transaction due to the conflict of interest such situations cause.

For a selling broker to receive compensation, the selling broker must be able to prove they are the effective cause of sale. To do this, the selling broker must meet three criteria:

• They must prove they introduced the buyer to the property by providing a listing or other information to the buyer that would cause the interest.
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• They must either attend a visit or call the listing broker in advance to say they are sending their client.
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• They must perform the follow-up such as contacting the listing broker, preparing documents, and contacting inspectors, surveyors, notaries and mortgage brokers.

The buyer must sign a buyer’s contract as well.

If the buyer is working with the selling broker by receiving listings and attending visits with the broker, then there are no issues. However, when the buyer finds properties on Centris, in the papers, or by walking by an open house, they must do the following:

• If the buyer finds a property of interest, they must inform their broker before contacting a listing broker and allow their broker to contact the listing broker first and arrange a visit. It is not enough to simply tell the listing broker they are represented.
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• Before entering an open house, the buyer must inform their broker. The broker must then contact the listing broker and inform the broker they are sending their client.
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• The buyer must also inform the listing broker they contact or visit in an open house that they are represented by a broker already and state which broker.

Basically, everything must go through the broker representing the buyer so the broker can effectively do their job and be able to receive compensation.

Buyers should always keep in mind that the listing broker representing the seller, is working for the seller to acquire the best price, and terms and navigate the laws to protect the seller. The selling broker does the same for their buyer. No broker is permitted to represent both parties by providing information or advice.

‘Basically, everything must go through the broker representing the buyer so the broker can effectively do their job and be able to receive compensation.’

Without representation, there is no insurance protection against fraud, no comparable provided to know if the price is fair, no guidance with the mortgage broker, notary, inspector and rules of the real estate brokerage act, which all must adhere to, both brokers and the public.

Also, if the buyer or seller believes their broker provided poor service, misleading information or performed an illegal act, the buyer or seller always has recourse by contacting the Organisme d’autoréglementation du courtage immobilier du Quebec (OACIQ)

Happy shopping!

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Next article: A window of opportunities for buyers

State of the market

Once again there is good news but reasons to be cautious on several levels. On September 4, 2024, the Bank of Canada reduced the prime lending rate to 4.25%, another quarter point. This is an indication that inflation has been reduced. It is also a reason for demand to increase as well as the price of inventory. There is still a housing shortage in Canada. Lower interest rates and increased demand mean higher prices. However, the good points are that while a property may be more expensive, the long-term carrying costs are lower. Many would rather pay higher prices and lower carrying costs than low prices and long-term high carrying costs.

Another factor to be cautious of is an escalation of war in the Middle East, Ukraine and other conflicted areas, and the U.S. election. These issues affect the supply chain for goods and services, inflation and interest rates. Escalation means higher inflation and interest rates.

‘… the good points are that while a property may be more expensive, the long-term carrying costs are lower. Many would rather pay higher prices and lower carrying costs than low prices and long-term high carrying costs.’

Therefore, there is a window where our real estate market will improve over the next few months and then an abrupt turn in which geopolitical events may improve or worsen dramatically, affecting both inflation, interest rates and our well-being, Time will tell but for the present, the facts are before us.

Have a great week.

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Other articles by Joseph Marovitch