Understanding Agency

What is agency? Under agency law, the REALTOR® legally owes you the duties and obligations associated with agency: utmost care, integrity, confidentiality, and loyalty.

A stringent Code of Ethics and Standards of Business Practice guides all REALTORS®. It’s your assurance of fair and honest representation.

A REALTOR® must disclose, in writing, whose interests he or she represents in any real estate transaction. A REALTOR® may represent you both as a buyer, and as a seller. In some cases, the Realtor may represent both the buyer and the seller involved in the same transaction.

Brokerage Activity

Real estate brokerage is an activity which is regulated and controlled to protect the public in real estate transactions. The Real Estate Trading Act, the By-Laws of the Commission and the Policies and Procedures of the Commission define how the profession should be practiced, so that consumers may be served fairly and competently.

Loyalty to the customer

Real estate brokerage representatives are bound by a strict obligation of loyalty to their clients, whose rights they are bound to promote and protect. They must act equitably toward each party to a real estate transaction.

Obligation to disclose

If your real estate brokerage representative has a personal relationship with the other party or if the brokerage representative is acting on their own behalf, the brokerage representative must inform you prior to the signing of the agreement of purchase and sale.

Similarly, if your real estate brokerage representative is to receive compensation from a financial institution or a professional they recommend, they must also inform you.

Advising and informing objectively and accurately

The brokerage representative must advise and inform the parties to a transaction objectively and must provide them with all the explanations they need to fully understand and appreciate the services being provided. They must also inform the parties of any factor which could negatively impact the transaction.

The brokerage representative must also be able to demonstrate the accuracy of the information they provide using relevant documentation. This information verification principle must be upheld throughout the sales process, as the brokerage representative is responsible for the information they are providing.

Agency

Brokerage representatives may or may not have an agency relationship with you. If you are a client then, there will be an agency relationship, if you are a customer then there is not an agency relationship. As a client, the brokerage representative and brokerage have a much higher level of responsibility to you than if you are a customer. The following sections give an explanation of agency and the obligations of the brokerage representative have to both clients and customers.

Sellers or Buyers Agency – with you as a client

Most sellers and buyers have agency relationship with a brokerage, the brokerage representative has the authority to represent you in dealings with others they are using. When you are in an agency relationship with a brokerage, brokerage representatives has the authority to represent you in dealings with others.

Brokerages and their representatives are legally obligated to protect and promote the interests of their principals (clients). Specifically, the brokerage representative has the following duties:

  1. Undivided loyalty. The brokerage representative must protect the principal’s negotiating position at all times, and disclose all known facts which may affect or influence the principal’s decision.
  2. To obey all lawful instructions of the principal.
  3. An obligation to keep the confidences of the principal.
  4. The exercise of reasonable care and skill in performing all assigned duties.
  5. The duty to account for all money and property placed in a brokerage representative’s hands while acting for the principal.

You can expect competent service from your brokerage representative, knowing that the brokerage is bound by ethics and the law to be honest and thorough in representing a buyer or representing a property listed for sale. Both the buyer and seller can be represented by their own brokerage representatives in a single transaction.

Transaction Brokerage – with both the buyer and seller as a client

Transaction Brokerage occurs when a brokerage representative or brokerage is representing both the buyer and seller in the same transaction. Since the brokerage representative has promised a duty of confidentiality, loyalty and full disclosure to both parties simultaneously, it is necessary to limit these duties in this situation, if both parties consent.

If you find yourself involved in a transaction brokerage relationship, before making or receiving an offer, both you and the other party will be asked to consent in writing to this new limited agency relationship.

This relationship involves the following limitations:

  1. The brokerage representative will deal with the Seller and the Buyer impartially;
  2. The Agent will have a duty of disclosure to both the Seller and the Buyer except that,
  3. The brokerage representative will not disclose that the Buyer is will to pay a price or agree to terms other than those contained in the Offer, or that the Seller is willing to accept a price or terms other than those contained in the Listing
  4. The brokerage representative will not disclose the motivation of the Buyer to buy or the Seller to sell unless authorized by the Buyer or Seller;
  5. The brokerage representative will not disclose personal information about either the Buyer or the Seller unless authorized in writing;
  6. The brokerage representative will disclose to the buyer defects about the physical condition of the property known to the Agent;
  7. The brokerage representative may disclose all comparable property information to the Buyer and the Seller at any time;
  8. The brokerage representative will not be required to disclose to the Buyer of the Seller confidential information obtained through any other existing or former agency relationship.

No Agency- with you as a customer

You may also choose to use the services of a brokerage representative without having any kind of agency relationship. This might occur, for example, when you are being shown a property by the Seller’s representative.

The brokerage representative you choose to work with in this manner has a legal and ethical duty to provide you with accurate, honest answers to your questions and can provide all these services:

  • Explain real estate terms and practices
  • Provide and explain forms used
  • Assist you in screening and viewing properties
  • Inform you of lenders and their policies
  • Identify and estimate costs involved in a transaction
  • Assist you in establishing your range of affordability
  • Prepare offers or counter offers at your direction
  • Present all offers promptly

A brokerage representative who is not your agent cannot:

  • Recommend or suggest a price
  • Negotiate on your behalf
  • Inform you of his/her principal’s top/bottom line
  • Disclose any confidential information about his/her principal unless otherwise authorized

You should not provide a brokerage representative, who is not your agent, with any information that you would not provide directly to the other party.

All Buyers and Sellers, whether in an agency relationship with a brokerage representative or not, will be given an agency brochure and asked to sign an acknowledgement that they have been provided this agency information and had an opportunity to review it.

Source: Nova Scotia Real Estate Commission Website.

For additional information, review the website at nsrec.ns.ca.