Client vs customer: What’s the difference?
Do brokerages owe clients a higher level of service and obligation than they do customers?
Although the terms “client” and “customer” are typically used synonymously in some businesses, they mean different things in real estate transactions and can have separate implications for a potential buyer and seller.
If you’re in the market to buy a home and engage with a brokerage, you will be given a choice to sign one of two types of legally binding agreements – a (client) representation agreement or a customer service agreement. If you choose to be a client, the brokerage is your champion. If you choose to be a customer instead, the brokerage provides you some level of service, but is not necessarily looking out for your best interest and is not obligated to keep your real estate search information confidential.
The brokerage has a fiduciary duty towards its clients. If you are a client, they are obligated to promote and protect your best interests in a real estate transaction. However, if you are a customer, the brokerage does not have that obligation, although they are still required to treat you with fairness, honesty and integrity.
Knowing this, it really comes down to assessing which relationship with the brokerage would best meet your needs.
If you’re highly knowledgeable about real estate and comfortable making decisions on your own, you could opt for a limited customer relationship, if beneficial. That said, I am not sure why you would choose to be a customer, given that the obligations from the brokerage would be reduced and might have little or no impact financially. I urge you to sign with the brokerage as a client.
Should you decide to move forward with a brokerage as a customer, keep in mind that it’s possible your agent may show you a home that is owned by a client of theirs. If this occurs and you’d like to make an offer on that particular property, it is crucial for you to know that any information you share with your agent, such as your price range or reasons for buying, will be shared with the seller. While your agent will most certainly facilitate your purchase, since you’re a customer, he or she will act in the best interests of the seller, who is a client to whom they have a fiduciary duty.
You might be questioning the imbalance between customer and client relationships, as have RECO and many others in the real estate sector. That’s why we are pleased that the Ontario government’s recent proposed legislative changes would eliminate the customer relationship. With this proposed change in place, it would be clear that a buyer or seller would either be a client or self-represented.
Even if you’re a client, you could be interested in buying a property whose seller is also a client at the same brokerage as you. In this case, the agent will act more as a facilitator between the buyer and seller, because they can’t promote the interest of one client over that of the other. That’s why the law gives clients the right to decide whether to proceed with multiple representation.
Regardless of whether you choose to be a customer or a client, make sure you thoroughly review and understand all documents you receive from the brokerage. Assess your needs, ask questions, and consult with your agent.
If you have a question for Joe about the home buying or selling process, please email email@example.com.
This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.
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.