New Consumer Protection Rules: Information for Consumers
The Superintendent of Real Estate has announced new rules for real estate licensees (Realtors) that will change the way a real estate professional can provide service to consumers. Under the new rules, real estate licensees will be required to:
- give consumers more information about commissions and fees — in particular, how the commission is to be divided between a listing brokerage and cooperating brokerage, or when there is no cooperating brokerage, retained by the listing brokerage;
- before working with consumers, inform them of the duties and responsibilities owed to clients and unrepresented parties;
- inform unrepresented consumers of the risks of dealing with a licensee who is representing another party to the transaction;
- only work for either the buyer or the seller in a single real estate transaction. Under the new Rules, dual agency, the practice of acting on behalf of both the buyer and seller on the same trade, will be prohibited except in extremely limited circumstances.
On June 15, 2018 there were changes to how real estate is bought and sold in British Columbia. These new rules, which were set out by the newly created Superintendent of Real Estate, change the way real estate professionals in BC provide service to the general public.
There is an incredible amount of misinformation out there about these rule changes, and the purpose of this small article is to provide a straightforward explanation on how these new rules affect you, the real estate consumer. It is not the intention of this article to cast judgement on the rule changes, but to remain impartial while explaining them. If you would like a legal opinion about real estate agency, it is advisable to speak with a Lawyer, which I am not.
For the most part these rule changes revolve around the banning of a concept called Limited Dual Agency. Limited Dual Agency is a practice implemented by the provincial government of British Columbia, which has been in place for many years. Basically, it goes like this. Imagine I have a client who has signed a Multiple Listing Contract with me to sell their home for the most money possible. I have a second client who wants to buy the home, and of course their intention is to pay the least amount of money possible. This scenario puts me in an impossible situation: I am legally, and ethically, bound to serve two masters with opposing interests. In an attempt to level the playing field for all parties, Limited Dual Agency, had us limit our agency responsibility to both parties. In essence, we were not to disclose to either party three key pieces of information about the other party: (1) the price they were willing to take/pay; (2) the motivation for selling/buying; or (3) any personal information about the parties aside from what was written on the Contract of Purchase and Sale.
On June 15, 2018 Limited Dual Agency was banned in British Columbia (except in rare situations). The same scenario will now play out differently. I will still have a client who has signed a Multiple Listing Contract with me to sell their home for the most money possible. However, when my buying client informs be that they would like to buy the house; I will not be able to represent them as a client. The Buyer in this case will have the choice to: (1) as an “Unrepresented Party”, have me facilitate the Contract of Purchase and Sale; or (2) begin working with another real estate professional in an agency relationship. The choice for you as the buyer will be between working with me, presumably as the real estate agent you trust, or work with another real estate professional you may not know or trust. As you can imagine, the choice is not necessarily a straightforward one.
Consumers who choose to conduct a real estate transaction without a real estate professional are known as “unrepresented parties”. While you aren’t required to have a real estate professional represent you in a real estate transaction, the expert advice, protection, and oversight that comes with being the client of a real estate professional can be very helpful.
Let’s assume for a moment, that because of our relationship and the trust we share, you decide to have me facilitate the sale with you being an “Unrepresented Party”. You will have to sign a new form called ‘Unrepresented in a Real Estate Transaction? Know the Risks.’ Interestingly, the risks outlined are that I will not be able to disclose to you: (1) the price the Seller is willing to take; (2) the motivation for selling; or (3) any personal information about the Seller aside from what was written on the Contract of Purchase and Sale. Does that sound familiar? Well that’s because it’s the exact same information we were NOT allowed to share under Limited Dual Agency. The difference now is that limitation only applies to one party and not the other, so you will want to be careful in this case not tell the real estate professional what your top dollar is (in my experience clients very rarely share that information anyway), because that professional will now have a legal obligation to share the information with the Seller.
It is impossible to say that deciding to enter into an “Unrepresented Party” agreement is in your best interest 100% of the time, or not in your best interest 100% of the time. Again I’m not a Lawyer, but from a practical perspective it seems that it really depends on the scenario. Do you know, like and trust the real estate professional? Do you feel like the listing agent might be able to have better success facilitating a deal?
In my experience in life in general there is often a disconnect between the rules and the reality but any changes that protect the consumers and stamp out shady practice have to be a good start. I’m confident that my clients know in their hearts that I am honest and fair, at the end of the day honest and fair is the most important factor in real estate. I know with certainty that there are many many other agents out there who are also honest and fair. I have facilitated dozens of sales to “Unrepresented Parties” (which was at the time called “No Agency”). I’m am 100% confident that each of those transactions was done in a fair and honest way. I know this because I have the Buyer testimonials to prove it.
Disclosure of representation
The Superintendent of Real Estate has created a new rule that requires a licensee to disclose to a consumer, at the outset of their dealings:
- whether the licensee will be able to represent the consumer as a client,
- what the duties and responsibilities of licensees are to clients and unrepresented parties, and
- how to file a complaint about a licensee’s conduct.
This new disclosure requirement is intended to ensure that consumers are not confused or misled about whether a licensee they are dealing with is going to be representing their interests in the transaction.
Yes. You may choose to be unrepresented rather than working with a licensee. Before making that decision, you should consider the risks of remaining unrepresented, and the potential benefits of having a real estate licensee represent your interests in a trade in real estate.
Q: I want to look at a couple of homes with a licensee. But I am not sure if I want a client relationship or if I want to be an unrepresented buyer. Do I have to decide right away?
It is up to you and the licensee you are working with to decide whether you wish to enter a client relationship. However, the licensee is not obliged to provide you with trading services (such as showing you homes) if you have not yet decided whether you wish to be the licensee’s client.
The Superintendent of Real Estate has created new Rules that generally prohibit the practice of dual agency, except in the rarest of circumstances. Dual agency refers to when a licensee represents, in a single transaction, two or more clients whose interests are in conflict. For example, a property seller and a prospective buyer for that property.
The practice of limited dual agency raised a number of concerns for consumers, including that:
- a licensee may not be able to be completely loyal and impartial to two clients with competing interests
- a licensee may not be able to properly advise those clients without improperly disclosing their confidential information to each other
- a licensee acting as a dual agent might prioritize his or her own interest in earning the whole commission, rather than acting in the best interest of his or her clients.
For these reasons, an Independent Advisory Group on real estate regulation in BC recommended that limited dual agency be banned in BC. Now, the Superintendent of Real Estate has created a Rule restricting limited dual agency (except in very limited circumstances).
Q: I have been working with a licensee for six months trying to buy a home. I came across one of my licensee’s listings, and I am interested in making an offer. I want him to represent me but he says he can’t, because limited dual agency is no longer allowed. Why can’t I work with my licensee anymore?
Licensees are no longer allowed to engage in limited dual agency, except in rare circumstances. Your licensee cannot represent both you (the buyer) and the seller in the same transaction. Because of the prohibition on limited dual agency, the licensee you have been working with cannot continue to act for you. However, you can choose a different licensee to represent you going forward. Your licensee can suggest names of other licensees who may be able to assist you.