I’m selling my home and my salesperson has offered to lower their commission if the buyer is represented by them as well. Is that allowed?
The situation you’re describing is known as multiple representation. Since your agreement is with the brokerage, it arises whenever you and the buyer are working with the same brokerage, even if you are dealing with different representatives.
While multiple representation is common in the real estate sector, the brokerage can only proceed with your consent. Also, your brokerage has important obligations in handling the matter that I’ll get to later.
First, it’s important to clarify the distinction between a “client” versus a “customer” of the brokerage. A client is a buyer or seller who has signed a representation agreement to work with a brokerage. When you are a client of a brokerage, they have an obligation to promote and protect your best interests and make certain disclosures in specific situations.
Customers sign a customer service agreement instead, and the brokerage does not have the same obligations. Typically, a customer relationship is best suited to buyers and sellers who are very familiar with the real estate world, and don’t need someone else to promote or protect their interests.
The distinction between client and customer is important because multiple representation only arises when the brokerage has two clients to the same transaction. Often it happens when a buyer without representation sees the “for sale” sign on a lawn or the MLS® listing online and gets in contact with the seller’s representative, who then offers to represent them as well. Or, if a property receives multiple offers, two of the buyers could be represented by the same brokerage.
In your case, we’ll assume the buyer and seller are both clients. Since the brokerage has an obligation to protect the best interests of both of you, it’s obvious where issues could arise. For example, the brokerage has knowledge about your home and about your selling strategy that could be very valuable to the buyer in putting together an offer. Similarly, they have information about the buyer’s circumstances that could be useful to you during negotiations. You can see where a conflict of interest would exist.
When the potential for a multiple representation situation arises, your brokerage has certain obligations. First, it must disclose that it proposes to represent more than one client in the transaction. Second, it must disclose the differences in obligations imposed on the brokerage by multiple representation as opposed to the obligations if they represented only one client. These primarily relate to differences in disclosure of information and differences in the services the brokerage will be able to provide. Preferably, these disclosures should be made in writing to prevent disputes later on.
Lastly, the brokerage must obtain the written consent of both clients to proceed with multiple representation. No matter what happens, the brokerage must always deal with you fairly, honestly and with integrity, and provide you with conscientious and competent service.
If one client does not provide written consent, the brokerage must release one of the clients. It’s up to the brokerage to decide which client to keep. If they decide to release you, they’ll often provide you with a referral to another brokerage.
In your case, the brokerage has offered to reduce their commission if you agree to multiple representation. It’s up to you to decide whether the savings is worth the trade-off.
As with all aspects of a real estate transaction, multiple representation is not something you should take lightly. Take the time to think it over and make sure you understand all of the implications before making a decision.Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.