When working with a Realtor, it is important to understand who the Realtor works for. To whom is the Realtor legally obligated?

Realtors are governed by the legal concept of "agency". An agent is legally obligated to look after the best interests of the person he or she is working for. The agent must be loyal to that person. A real estate company may be your agent - if you have clearly established an agency relationship with that Realtor. But often, you may assume such an obligation exists when it does not.

Realtors believe it is important that the people they work with understand when an agency relationship exists and when it does not - and understand what it means. In real estate, there are different forms of agency relationship:

1. Seller's Agent: When a real estate company is a "Seller's Agent", it must do what is best for the Seller of a property. A written contract called a listing agreement, establishes Seller agency. It also explains services the company will provide, establishes a fee arrangement for the Realtor's services and specifies what obligations a Seller may have.

A Seller's agent must tell the Seller anything known about the Buyer. For instance, if a Seller's agent knows a Buyer is willing to offer more for a property, that information must be shared with the Seller. Confidences a Seller shares with a Seller's agent must be kept confidential from potential Buyers and others. Although confidential information about the Seller cannot be discussed, a Buyer working with a Seller's agent can expect fair and honest service from the Seller's agent and full disclosure of pertinent information about the property.

2. Buyer's Agent: A real estate company acting as a "Buyer's Agent" must do what is best for the Buyer. A written contract, called a Buyer Representation Agreement, establishes Buyer agency. It also explains services the company will provide, establishes a fee arrangement for the Realtor's services and specifies what obligations a Buyer may have. Typically, Buyers will be obliged to work exclusively with that company for a period of time.

Confidences a Buyer shares with the Buyer's agent must be kept confidebtial. Although confidential information about the Buyer cannot be disclosed, a Seller working with a Buyer's agent can expect to be treated fairly and honestly.

3. Dual Agency: Occasionally a real estate company will be the agent of both the Buyer and the Seller. The Buyer and Seller must consent to this arrangement in their listing and buyer rrepresentation agreements. Under this "Dual Agency" arrangement, the company must do what is best for both the Buyer and the Seller.

Since the company's loyalty is divided between the Buyer and the Seller who have conflicting interests, it is absolutely essential that a Dual Agency relationship be establlished in a written agency agreement. This agreement specifically ddescribes the rights and duties of everyone involved and any limitations to those rights and duties.

Who is working for you? It is important that you understand who the Realtor is working for. For example, both the Seller and the Buyer may have their own agent which means they each have a Realtor who is working for them. Some buyers choose to contact the Seller's agent directly. Under this arrangement the Realtor is working for the Seller, and must do what is best for the Seller, but may provide many valuable services to the Buyer.

A Realtor working with a Buyer may even be a "Sub-Agent" of the Seller. Under sub-agency, both the listing agent and the co-operating agent must do what is best for the Seller even though the sub-agent may provide valuable services to the Buyer. If the Seller and the Buyer have the same agent, this as dual agency and the Realtor is working for both the Seller and the Buyer.

Code of Ethics: Realtor believe it is important that the people they work with understand their agency relationship. That's why agency disclosure is included in a self-imposed Code of Ethics which is administered by the Real Estate Council of Ontario. The code requires Realtors to disclose in writing the nature of the services they are providing and encourages Realtors to obtain written acknowledgement of that disclosure. The Code also requires Realtors to enter into a written agency relationship with any Sellers or Buyers they are representing.

This is for information only and is not a contract.