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There Currently Exists 2 Types of Agency Relationships in Real Estate Transactions in Alberta.

In a common law agency relationship, the agency relationship exists between the client (a buyer or seller), and the real estate brokerage (company). If both parties to a transaction are represented by the same brokerage, the brokerage has a conflict of interest. Designated agency is a departure from traditional common law agency practices and addresses this conflict. In designated agency, the agency relationship exists between the client and a designated agent(s) from a particular brokerage, and not with the brokerage as a whole.

 

Because the agency relationship is between the client and the designated agent(s), designated agency eliminates the conflicts of interest that commonly occur in a brokerage when two REALTORS® from the same brokerage represent the buyer and seller in the same transaction. Designated agency allows industry members to act as sole agents and provide full fiduciary duties to all clients except in the limited circumstance where the same designated agent(s) represents the buyer and seller in the same transaction. This is the agency relationship that consumers customarily expect in their real estate tranaction and why I choose to affiliate myself with a Designated Agency brokerage.

 

In Alberta, a real estate agent must inform his or her clients as to what type of brokerage they work for, be it a common law brokerage or a designated agency brokerage. When working with a real estate agent you’ll always be required to sign a written service agreement – whether you are a buyer or a seller. Unfortunately for buyers, this disclosure document may come well after you have been working with your broker/agent. This document explains the nature of the agency relationship in detail and confirms the client’s choice of agency representation. A designated agency relationship allows your real estate agent to fulfill their responsibilities and obligations to their clients even when the other party to a transaction is represented by another real estate broker from within the same real estate brokerage.

 

If the designated agent represents the other party to the transaction, this creates the same conflict as discussed in common law (i.e. the very same agent is representing both parties). In addition to the options to resolve the conflict identified in common law, in designated agency, the client can also be referred to another designated agent within the brokerage who may provide the client with sole agency representation.

 

Real estate agents are obligated to protect and promote the best interests of their clients and generally have the following legal and ethical duties:

  • Loyalty - to protect their client’s negotiating position and to work honestly in the best interests of their client
  • Obedience - to carry out all lawful instructions of their client.
  • Confidentiality - to keep the confidences of their client.
  • Competence - to exercise reasonable care and skill in performing all assigned duties.
  • Disclosure - to disclose all relevant information known by the agent that may influence their client’s decisions.
  • Accounting - to account for all money and property held by the agent while acting for their client.

As with any business relationship, the client has the duty to pay any agreed compensation to the brokerage. Most often, as in most real estate transactions where there is a sale, the full amount of the compensation is paid by the seller to their brokerage through their brokerage agreement for both the buying and selling sides of the transaction since this compensation is built into the fair market value of a home.

 

It’s important to understand what legal responsibilities your real estate agent and brokerage has to you and to other parties in the transactions. This is clearly outlined in the written service agreement and not left for you to assume. Ask your real estate agent to cleary explain what type of agency relationship you have with him or her and with the brokerage company at the earliest opportunity.

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Data supplied by CREB®’s MLS ® System. CREB® is the owner of the copyright in its MLS® System. The Listing data is deemed reliable but is not guaranteed accurate by CREB®.
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