Why It's Best NOT to Buy From the Listing Agent

It is important to understand the concepts of “agency” and “representation” as they apply to buying a home.

 

“Agency” is the relationship between two parties when they agree to have one party act on behalf of the other. “Representation” is the term used to define the relationship between a brokerage and a client.

 

There are generally two types of representation in a real estate transaction:

 

- By signing a listing agreement, agency is established between the seller and real estate brokerage. The listing agent represents the seller client in the transaction and promotes the best interests of the seller.

- By signing a buyer representation agreement, agency is established between the buyer and real estate brokerage. The buyer’s agent represents the buyer client in the transaction and promotes the buyer’s best interests.

 

As you can see, there is an inherent conflict of interest when one realtor works with both a seller and a buyer. The realtor simply can’t promote the best interests of both parties at the same time.

 

 

 

 

 

 

 

 

 

While it is legal in Ontario for a brokerage to represent both a buyer and seller in the same transaction, there are caveats. The brokerage must make clear to both parties how its services will differ in a situation of multiple representation (also called dual agency). Generally, this means a facilitation role and non-disclosure of information that might give one or the other party the upper hand in negotiations. Secondly, both parties must agree in writing to the multiple representation.

 

If a listing agent is offered the opportunity to put in an offer on behalf of a buyer, they will typically ask to have a Customer Service Agreement signed. This agreement establishes the relationship as being between agent and customer, rather than client. The duties owed to a customer include fairness, honesty and integrity as well as conscientious and competent service, but do NOT including promoting the buyer's best interest or offering advice.

 

Some buyers think that dealing directly with the listing agent will get them a better deal, that the agent will tell them the price the seller is willing to take, or help them to win in a bidding war. This is not the case. The listing agent’s role is to get as much money for the seller client as possible.