In REM’s April edition, Mark Weisleder wrote an editorial entitled 5 Key Points About Buyer Representation Agreements.

However, there is another side that Mr. Weisleder is unable to offer given that he is a practicing lawyer and not a practicing real estate agent.

How often are we as Realtors faced with a scenario where a buyer has no interest in even sitting down with us to discuss the ramifications of the Buyer Representation Agreement? How many times do we run into difficulty moving a buyer from our first contact with them to a face-to-face meeting?

In my 29 years in this industry, I can’t think of a weaker link than our lack of skill in getting a buyer into the office before ever showing them a single house. An all-too-common practice is to believe we are doing our seller clients a service by bringing any potential buyer who shows even the remotest of interest into their home. And more often than not we have absolutely no information about that buyer other than his first name. It can be claimed that even that information is unverified.



Our entire industry has missed the most pertinent point of all when it comes to buyer representation and the BRA. That point speaks to why we have buyer representation in the first place. To answer that question we must first take a short trip down memory lane.

Ontario officially adopted buyer representation on Jan.1, 1995. Prior to that, the MLS listing agreement stated that any and all co-operating brokerages’ fiduciary duty was with the seller, as it was the seller who was paying the co-operating brokerage’s commission. Fiduciary duty was inextricably tied to the client paying the commission. Now, I could write an entire paper arguing that the buyer actually pays the entire commission, but let’s leave that point on the sidelines for now. A greater issue was that in those early days prior to Jan. 1, 1995,  real estate salespeople working with a buyer routinely ignored this obligation with a “wink and a nudge”.

“Don’t worry; I will get you the best deal” was a commonly accepted sales pitch we often used when working with our buyer “customers’, which of course was in direct opposition to our fiduciary duty to our principal, the seller.

Fast forward 20 years, and ask any group of agents why we have buyer representation today and the overwhelmingly popular answer will be because it “protects our commission”.  If you look at Mr. Weisleder’s editorial, all five of his points revolve around this same issue of protecting our commission. He has fallen into the same trap that we as an industry have fallen prey to.

It cannot be denied that the BRA does in fact protect our commission, but that was not the driving force behind why buyer representation came into being in the first place.  We adopted buyer agency because without it, buyers had no legal protection whatsoever, even in the face of believing that they did.

If you can clearly understand what your potential client requires, and have the ability to fulfill that requirement, a transaction is likely to ensue. The problem with the approach that Mr. Weisleder has suggested in his editorial, which is shared by the vast majority of salespeople, is that we want our buyers to sign the buyer agency agreement because it protects our commission. That’s what we want, not the buyer. This is of little or no interest to the buying public. How can you ram this idea down a buyer’s throat and expect they will respond favourably?

Conversely, if we are skilled enough to bring all potential buyers into our office, have an honest discussion about the different levels of service that all buyers have the right to choose from and allow the buyer to make their own informed decision, what buyer would knowingly choose to be a customer?

The single most important point surrounding buyer representation is the ramification of a buyer choosing “client service” vs. “customer service”.  When properly explained to your buyers, there is only one logical choice for them to make. Without its proper explanation, not only are we contravening a RECO rule, but we are trying to get a buyer to sign the BRA because it is in our best interest. That, as we all know, is like pushing a rope uphill.

32 COMMENTS

  1. Section 13 of Code of Ethics:

    SELLER REPRESENTTION AGREEMENT

    If a brokerage enters into a seller representation agreement with a seller and the agreement is not in writing, the brokerage shall, at the earliest practicable opportunity and before any buyer makes an offer, reduce the agreement to writing, have it signed on behalf of the brokerage and submit it to the seller for signature.

    Section14 of Code of Ethics:

    BUYER REPRESENTATION AGREEMENT:

    If a brokerage enters into a buyer representation agreement with a buyer and the agreement is not in writing, the brokerage shall, before any buyer makes an offer, reduce the agreement to writing, have it signed on behalf of the brokerage and submit it to the seller for signature.
    The above 2 sections are identical, with exception of buyer and seller. We have never had any discussions about getting listings signed when representing seller. We have to adopt the same frame of mind when getting a BRA signed as we do when we get a listing signed.
    I find the above article assumes too much in regards to how realtors handle BRA. The article focuses on negative aspects of how a BRA is handled by realtors.
    In my experience professional realtors have been trained and understand the BRA and have no issue about using it. Royal LePage provides excellent training, and I embraced that training and use BRA without any issues.
    If a realtor does not use BRA properly, it’s up to the individual and their manager to bring the realtor up to speed. We have a few forms we use regularly, Listing Agreement, BRA, it’s not too complicated.
    The discussion should be around getting better training for BRA and not the form itself.
    Sincerely,
    Rita Giglione, Broker
    Royal LePage Your Community Realty Inc., Aurora

    • correction: under Buyer Rep Agreement

      “writing, have it signed on behalf of the brokerage and submit it to the seller for signature”…….. the word “seller” in this sentence should be “buyer”

    • Rita buyers and sellers may be treated the same in law and under the rules of the Board, but agents and consumers do not treat them same. The idea that a buyer has to or may have to pay fees is something they are neither familiar with or comfortable with. Also, the honest discussion about fees is not being had between the buyers and their Realtor. This is in part due to the fact that we still accommodate buyer fees in the listing a greens and in the MLS listing itself.

      The benefits of removing the pillar of remuneration would be significant. Realtors will be forced to discuss fees with their clients and that would contribute to overall professionalism.

      Those agents would be forced to justify those fees and that would contribute to overall professionalism.

      Realtors would have no good reason to prejudice different business models because cooperating fees would be less of an issue…this would contribute significantly to overall professionalism and build significant trust between the industry and the consumer.

      So to suggest the rules are clear enough doesn’t matter. To suggest that the boards need not get involved is simply not true. Just as the small change forced upon us in late 2010 has had a significant impact on our industry, so to would a small change such as removing the pillar of remuneration make us a better, stronger and more trustworthy industry.

      • For all intents and purposes the Compensation Pillar has already been neutralized — it’s a moot point and has been for awhile.

        I seriously wonder if you are indeed a practitioner, but if are you’re obviously a discount broker. Your ability to discuss the subject of compensation is limited to the use of the word “fees” because in your simple mind that’s the only way to address the subject.

        In truth a cost of service discussion that makes commission or fees paramount is unprofessional, because it’s a superficial discussion. The actual cost of the service is only determinable upon the completion of the sale. And if the seller relied on someone incompetent to advise and counsel them, then they will have paid well above your “fees”. A practitioner like yourself who obsesses over fees, clearly can’t bring value added to the table, because you don’t even understand it, in the first place.

        • Alan your child like cut downs speak volumes about you and your character. And your suggestion that the compensation pillar has been neutralized speaks to your lack practical experience within the industry. In fact your whole rant speaks volumes about your overall lack of understanding and ignorance. To say a discussion of fees is unprofessional and then to refer to me as a DISCOUNT broker speaks to your prejudice
          With “fees neutralized” and with the ability to charge whatever we want, the a reference of me being a discount broker makes no sense. What would my discount be based on? Heck I don’t even need to tell you you’re a joke!

          • I think we’re finally making some progress. Since you don’t feel you’re discounting as against what anything a competitor may charge, then clearly your competitors can’t be charging anyone more that what you would — ergo, what is the point of your constant REM soap-box preaching about high fees!

            You pretentiously infer a claim to offer better value than those whom you disdain (therein lies your alleged discount) without ever explaining your own value argument –beyond lamenting the unspecified charges of your competitors.

            You’re the “poster boy” for what’s wrong with organized real estate — someone who needs to think he has it all figured out, yet who can’t make an intelligent argument, or respond lucidly when pressed.

            However, I am thoroughly pleased when a discount broker acknowledges, that there is no such thing!

      • Hard working Realtor,
        Honestly, I do not see what the problem is, the BRA is simpler than the Listing Agreement.
        You don’t need to change the form.
        I have used the form since 1995.
        The clause in the BRA regarding commission is clear and uncomplicated.
        I my experience I have noticed realtors are either comfortable or uneasy with using the form, and frankly it all comes down to TRAINING.
        Good training provides the confidence and skill. Also it is not the Boards responsibility to ensure Realtors have this training, it is up to the individual and their manager.
        Most listing (I would guess 98%) on MLS the seller pays the selling broker.
        As Alan M has stated below, I wonder if you are even a licenced Realtor, simply because some of your statements lack logic.
        Sincerely,
        Rita Giglione, Broker
        Royal LePage Your Community Realty Inc., Aurora

  2. “I could write an entire paper arguing that the buyer actually pays the entire commission, but let’s leave that point on the sidelines for now.” I’d also enjoy reading your views on this Ken. If a sale is recorded on MLS at the purchase price, and since the fees are paid from this price, can there really be any doubt that the buyer is paying the fees (commission)? Btw, great article :)

  3. I love this piece. Lets get off the mindset that our first obligation is to get paid. Yes getting a paycheck is our goal and that is great, but not at the expense of a council or business practices decision against you. Our first obligation should be consumer protection, otherwise we look like that “other ” sales industry.
    As a long time member of a local board BP hearing and investigation panel I have found there are three distinct things that get Agents into trouble.
    1) Poor communication, and one item on this list is not being able to tell your prosepctive client why a Buyers agency agreement would be important to them. Communication goes even further but that is for another day.
    2) Not knowing agency. “Who is your client?” Again a clearly understood BA agreement is essential, just like it is with a listing agreement.
    3) Working outside the agents area of expertise. This applies to so many aspects of real estate but specifically if you cannot explain a Buyers agency, why work with anyone as a Buyer client? But this is less of an issue than the not knowing agency for today’s topic
    .
    I have found once I have explained anything to a client in the simplest terms as accuratly as I can, the Client can make their own decisions and my life gets a whole lot easier with less risk.

  4. When Buyer Representation is properly and legally explained to Consumers immediately 70% of registrants would never be able to get one signed because they lack the core competencies required to fulfill the due diligence provisions inherent when bound through a full disclosure Buyer Agency Agreement.

    Even the fact that when the Buyer enters a BAA they are actually entering one with the Brokerage and not the sales rep alone, creates so many legal issues that it is a practical impossibility to ever happen in the current system and brokerage sub-culture.

    How many registrants can even explain the complexity of Dual Agency where two different Buyers who have separate BAAs with a single brokerage are looking for the same property type and price point. Clearly not the ones that were interviewed in the news over bidding wars!

    Everyone has forgotten ( or I guess most not been around long enough) who the consumer turned on at the time of the last market correction long before instant education was available on the internet. Consumers who lose $1,000s of dollars look for the easiest route to recover it. Now they have BAAs to fall back on and use to recover lost money. In 1990 this was not an option because everyone worked for the Seller. That has not been the case for more than a decade but……

  5. Well said. Too often, real estate sales people look through the wrong end of the binoculars. A similar situation comes in the “I love referrals” mantra. Marketing and representation should focus on our ability to satisfy the requirements of those we serve. If you are looking for a realtor in London, I offer nearly 40 years experience, extensive local market knowledge, and a determination to get the job done well so you and your office colleagues make me your go-to London contact.
    Douglas Cassan, Royal LePage Triland Realty,Brokerage (Independently owned and operated) London

  6. While wholeheartedly endorsing Ken’s position, I despair of it gaining much traction on the street. Until our industry comes to grips with the conflict between our common law fiduciary duties and our deeply entrenched, commission-fuelled sales culture, change is unlikely.
    Ron Stuart, FRI
    Halifax

  7. Protecting Commissions is absolutely the overwhelming reason why agents have bought into BRA. Constantly I hear Realtors say to me that because of their BRA they require full fees to be paid, and I guarantee that the majority did not have the honest and frank discussion about listings offering less than traditional fees. Bottom line is our industry is not dealing with this issue in a fair and ethical manner and it will backfire, and it will only make us look less trustworthy.

    However, I don’t think this was our Boards intent, they’ve simply failed in execute it properly. It should be made very clear in the agreement that buyers are made aware of and understand the implications of signing an agreement that might interfere with them getting a deal put together. And yes it is in DIRECT conflict with our fiduciary duty to act in our clients best interest not our own.

    How do we solve this problem? First CREA needs to remove the pillar of remuneration. Second, Boards need to ensure potential clients are made aware of how fees work and the implications it might have on getting a deal done.

    We’ve made significant strides in the last couple of years, but it’s clear we are not fully there yet.

    • With regards to: “Second, Boards need to ensure potential clients are made aware of how fees work and the implications it might have on getting a deal done.” are you suggesting that the aforesaid applies to buyer’s but not to seller’s, or that such disclosure should be dispensed equally, to both?

      • Never mind that boards had better stay the heck away from explaining brokerage fees, structures and the variances applied by an independent contractor..

        • One of the points made in this article is that BRAs are being used for the wrong and unethical reasons. Fees are obviously made very clear to the sellers so that’s not an issue. And no I’m not asking boards to explain fees, just ensure that buyers understand that cooperating fees or commissions can vary and that they are made aware of what happens when those fees or commissions do not match the agreement they are signing.

          • I’m not understanding your explanation. Are you saying that the practitioners who represent a seller, are typically more ethical about explaining the ramifications of commissions, than those practitioners who would represent a buyer through a BRA?

          • Perhaps when Marty Douglas retires you could take over his column. It would be good for you to expand and show the readership your expertise in areas other than fees and the ongoing abuse of same.

          • Review your post, you are asking boards to explain fees. A Board’s clients and stakeholders are its members, they are not the buying and selling public. Boards have no jurisdiction over a brokerage’s business platform and so it should not be sloughed off on them lest they be seen as influencing their members independent business decisions.

            You’re correct that the BRA is being used for the wrong and unethical reasons, that’s the discussion we are having – the failure of a registrant to properly explain same or their lack of desire or ability to explain same. Those obligations fall to a registrant under a province’s real estate Act and so it is up to registrants to explain the agreements they ask their clients/customers to sign and the overseers of those Acts whose purpose is consumer protection, to explain their rights.

            In that regard, RECO’s Joe Richter is doing a fine job.

  8. Re/max brought the REBAC courses to Ontario in 1991/2 and several hundred salespeople and brokers, including myself,obtained our in our ABR designations at that time,
    The Re/max brokers encouraged and supported our associates to embrace the Buyer Representation idea long before it was mandatory.

    Dave Liniger,the co-founder of Re/max was designated REBAC’s person of the year in 1994 and was inducted into their hall of fame in recognition of his support in Canada and the USA of REBAC in earlier years.

    Ken Wilder was a couple of tears or so behind us.

    John DiMichele was a TREB director along with myself in the late 90’s and was hired by TREB when I became President in the early 2000’s. His knowledge of Real Estate and IT was second to none then as it still is today.

    David Pearce,Broker/Owner and Broker of Record Re/max Rouge River Realty Ltd.

  9. Was it not a follow up to the American Sherman Antitrust situation stateside as noted at the time by Treb’s John DiMichele in meetings of the day, that prompted Buyer Agency to be practiced in Ontario?

    Not long after Buyer Agency was implemented in Ontario, I penned these copyrighted articles that have been reprinted many times.

    There is a notation preceding all my articles, to note that the use of the designation ‘agent’ is forbidden now in Ontario, therefore read the word agent where it appears, as “registrant.”

    Textbooks, general real estate books and legal notes, and newspaper articles will eventually all have to be rewritten in order to comply. Not practical of course.

    I don’t see that happening any time soon. The publishing houses would have a field day. Anyone currently writing might want to note the Ontario stipulations, and perhaps add a disclaimer.

    The world doesn’t rotate around the Prov of Ontario, although many in REM-world readership appear to be so located.

    Commissioning an Agent (from the Buyer’s point of view)

    Commissioning an Agent (from the Seller’s point of view)

    It’s ALL about “representation” – Do you have it…. ? This material was written for “my” would be buyers and sellers out there in the public.
    I share with REM not for publicity because I have nothing to sell to the readers, but offer it as sharing garnered tools of the trade accumulated over 35 years.

    http://www.carolyne.com/representation.html

    Carolyne L
    [email protected]

  10. Ken, A very very very small minority of registrants in the lead up to buyer agency becoming legal in Ontario, had ever complied with the EXCLUSIVE SELLER AGENCY provisions that had been legally required prior to 1995. FEAR of getting outed from decades of unethical misrepresentations like you stated “i’ll get you the best deal” stopped OREA and CREA from pushing for OPEN HONEST AND FULL BUYER AGENCY education of the public.
    Watered down interpretation of the law brought ” at least before and offer is signed” as the minimum standard of practice accepted universally for buyer agency by all registrants.
    An Entire Franchise Brand fought from 1995-2000 to stop Buyer Agency because they FEARED the public would find out they were lied to throughout the 1985-1990 housing bubble forming. That Franchise Brand ( a canadian brand btw) brokerages fought to stop BA at local levels and delayed it for almost 10 years (2005) and effectively it has been delayed til today or the second before you sign on the dotted line

    Until such time that the Regulator demands “at the earliest possible time but at a minimum before anyone is shown a property”, your wisdom and efforts are fruitless. In the mean time 3rd party non-registrants can use this “out” in BA to educate the public.

    • There is no doubt a written agreement is desirable to ensure clarity. I remember the starting rules in 1973. However in saying “We adopted buyer agency because without it, buyers had no legal protection whatsoever, even in the face of believing that they did.” …we must also fast forward to today. RECO says reduce your agreement in writing for presentation…but the buyer does not have to sign it. Can the buyer still be represented as a client…absolutely (at least in Ontario). If the Realtor on behalf of the brokerage acts like an agent of the buyer, example giving advice instead of just information (as would establish a customer relationship) then its the old , “if it walks like a duck…its a duck”. So, that being the case, there is no written document required to be have a client relationship, it does then become suspect as to who is benefiting more.

      • And, the introduction of the BRA shouldn’t be reduced to such a simple cause either. The courts saw fit to recognize buyer claims and apply implied agency within the context of common law’s definitions of same.

        I’d venture to say that every form and every clause inclusive of revised wordings within those forms result from court decisions.

  11. Was it not a follow up to the American Sherman Antitrust situation stateside as noted at the time by Treb’s John DiMichele in meetings of the day, that prompted Buyer Agency to be practiced in Ontario?

    Not long after Buyer Agency was implemented in Ontario, I penned these copyrighted articles that have been reprinted many times.

    There is a notation preceding all my articles, to note that the use of the designation ‘agent’ is forbidden now in Ontario, therefore read the word agent where it appears, as “registrant.”

    Textbooks, general real estate books and legal notes, and newspaper articles will eventually all have to be rewritten in order to comply. Not practical of course.

    I don’t see that happening any time soon. The publishing houses would have a field day. Anyone currently writing might want to note the Ontario stipulations, and perhaps add a disclaimer.

    The world doesn’t rotate around the Prov of Ontario, although many in REM-world readership appear to be so located.

    * Commissioning an Agent (from the Buyer’s point of view).

    * Commissioning an Agent (from the Seller’s point of view)

    It’s ALL about “representation” – Do you have it…. ? This material was written for “my” would be buyers and sellers out there in the public.
    I share with REM not for publicity because I have nothing to sell to the readers, but offer it as sharing garnered tools of the trade accumulated over 35 years.

    http://www.carolyne.com/representation.html

    Carolyne L
    [email protected]

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