Even if they haven’t experienced it directly, most Yellowknife homebuyers are familiar with the concept of Buyer Representation. It’s what they see when they watch real estate Reality TV, and it’s what they usually hear about from family and friends who purchase property in other cities. Buyer Representation has been around since the 1990s in the provinces and is considered to be a very valuable service, but until we began offering it in 2012 it was very rarely practiced in the Northwest Territories.
Yes, local Realtors worked with buyers before 2012, but they generally didn’t work for buyers. The difference is subtle and yet incredibly important. It can mean the difference between simply being sold a home, or getting the best possible deal on a home.
To understand the distinction between working with or for a buyer, it helps to think in terms of other professions. Take a car dealership as an example. When a man walks into a car dealership he usually seeks the help of a saleperson. The salesperson will work with the prospective buyer, but won’t work for him or look out for his best interests. The buyer is merely a customer. The salesperson is looking out for the best interests of the owner of the car dealership. The buyer is well aware of the fact he is unrepresented in the purchase transaction. It’s a case of caveat emptor – “let the buyer beware.”
Compare this with a woman who walks into a law office seeking legal services. She doesn’t want a lawyer to merely think of her as a customer, she wants a client relationship with a lawyer who is acting as her representative and “fiduciary“ – a trusted professional who owes her duties of obedience, loyalty, disclosure, confidentiality, accountability and reasonable care and due diligence.
When it comes to the services one would expect to receive, there is a big difference between being a client and being merely a customer. The question is, which of these two scenarios applies to the relationship between a homebuyer and a Realtor? The answer is that they both do, depending on who the buyer is working with. This can be confusing and can lead to costly mistakes if a buyer assumes he is in a client relationship when in fact he is being treated as a customer.
In the real estate world the customer relationship (e.g. car salesperson) is referred to as “No Agency.” The buyer is treated as a customer rather than as a client. The Realtor must treat the buyer honestly and fairly, but does not owe the buyer loyalty, confidentiality, due diligence, or any of the other fiduciary obligations. And in fact the Realtor cannot negotiate on the buyer’s behalf because the Realtor is legally bound to look out for the best interests of the seller. Prior to 2012, Yellowknife Realtors generally worked under “No Agency” relationships with buyers and owed their loyalty to sellers on MLS transactions.
By contrast, Buyer Representation, or “Designated Agency”as it’s also known, is a client relationship. The client is owed the full slate of fiduciary duties. It is the Buyer’s Agent’s job to negotiate solely in the buyers’ best interests, going head-to-head with listing agents in an attempt to secure the best possible deal. In fact it’s probably because of this head-to-head dynamic that Buyer Representation is the only relationship between buyer and Realtor that you’ll ever see on Reality TV.
When asked which of these two relationships they would rather have with a Realtor, more and more homebuyers in Canada are choosing Buyer Representation. And why wouldn’t they? They get all the benefits of professional representation at no cost.
In my next post I’ll talk about whose job it is to make sure buyers don’t make incorrect assumptions about the duties they are owed by a Realtor. As a preview, here are some links to “Agency Disclosure” forms and websites used in the provinces.
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