Your relationship with your realtor should be easy - they represent you and your interests, plain and simple. But in reality, paperwork and contracts can make the details of your relationship complicated. Sometimes, it’s not even clear exactly what you’re agreeing to when you sign. 

 

 

Here, we’ve outlined the four most common documents your realtor will ask you to sign, and some of the most important things to know about each one.

Working with a Realtor (W.W.a.R.) (Form 810)

When you sign a W.W.a.R. agreement, you’re actually signing into a relationship with the brokerage, not your specific agent. This protects both you and your realtor. If you’re unhappy with your realtor, for example, you can switch to another within the brokerage and you won’t be breaking your contract. This is included in all agency agreements and realtor services - and it can save you from having to pay some severe penalties.

 

Otherwise, the W.W.a.R. agreement is one of the simplest contracts your realtor might ask you to sign, and it’s the only one you’re required to sign by law. It outlines the different types of relationships you might enter into with the brokerage, like client or customer relationships, and that you acknowledge that your brokerage will enter into similar agreements with other buyers and sellers. This is necessary because not all broker contacts are created equal. Each contract offers a different level of protection, and the W.W.a.R. offers the least.

 

The most binding contracts are fiduciary agreements. These are legal relationships where one party, the agent, can only act in the best interest of the principal (the person who hired them). Think lawyers or accountants. An agent can’t have conflicting relationships with other parties, just like a lawyer can’t represent both a plaintiff and a defendant in a case. That would be a conflict of interest.

 

A brokerage might represent multiple parties with different interests and wishes, and some of these might be at odds. Someone might want to buy a house just like yours, but for a lower price than you want - that’s a conflict of interest. If you’ve only signed the W.W.a.R., the brokerage doesn’t have the same obligation to you as they have to their fiduciary clients or customers… so you might end up with the short end of the stick.

Customer Service Agreement (C.S.A.) (Form 310)

The C.S.A. that you sign will likely be a “non-exclusive buyer’s customer service agreement”, although other types exist. It will outline the type of property the brokerage will try to find for you, the buyer, and the date window that the agreement is valid through.

 

It also explains that the brokerage will be representing you as a customer, not as a client. “You can decide to be a customer, rather than a client, but should be aware that the obligations of the brokerage will differ,” says the Real Estate Council of Ontario.

 

Brokerages still have to represent their customer with honesty, integrity and fairness, and they have to disclose everything they know about a transaction to their customer. But they’re not tied to the fiduciary duties of a client relationship.

 

The “non-exclusive” portion of the C.S.A. means that the customer can still enter into other relationships with other brokerages. This allows you to be represented by multiple brokerages yourself, if you choose. The C.S.A. also explains the limitations of the brokerage’s liability. For example, the brokerage isn’t responsible for knowing any hidden defects in the property that aren’t outlined in the documents supplied by the seller - that’s on the seller.

 

It’s really important to read your specific C.S.A., and to ask your realtor about the differences between client and customer relationships. Since a customer relationship offers less protection than clients, it’s important to fully understand and acknowledge this difference before you sign.

Buyer Representation Agreement (B.R.A.) (Form 300)

A Buyer’s Representation Agreement legalizes the fiduciary relationship between a buyer and the brokerage as a client. Usually, this grants the brokerage the exclusive authority to act as the buyer’s agent.

 

Fiduciary relationships protect the buyer in a number of ways. Since the brokerage has the legal duty to protect and aid the buyer, it legally protects the buyer from bad advice. It also ensures that your realtor will tell you the hard truths you don’t want to hear. Exclusive arrangements let your realtor be as forward and unbiased as possible, since they won’t be penalized for putting their fiduciary duties ahead of the possibility of hurt feelings.

 

One big part of the B.R.A. is that is establishes the agent’s commission. If the buyer purchases any property, then the buyer consents to paying a commission to the brokerage. In most B.R.A.s, it may also outline a commission to be paid to the brokerage if the buyer pays some sort of lease, instead of purchasing a property.

 

The standard commission rate is actually really important for the buyer, even though it might not feel that way. It ensures that your realtor is truly working on your behalf - they can’t profit more or less than the contract specifies, so they can’t be incentivized to push you into properties that aren’t in your best interest.

 

Another portion of the B.R.A., like all agency agreements, is the acknowledgement of multiple representation. When you sign, you consent to the brokerage representing multiple, possibly conflicting, interests, such as other buyers and sellers in your area. But as a client, you get precedence.

Listing Agreement (L.A.) (Form 200)

A Listing Agreement outlines the relationship between a seller of a property and the brokerage that’s going to sell it - like the B.R.A., but for sellers. The Listing Agreement can be both exclusive and non-exclusive. Unlike B.R.A.s though, the non-exclusive Listing Agreement is invalid unless an MLS Data sheet is included. The data sheet outlines the details of the property as it’s listed on Multiple Listings Service. This isn’t something you would typically have to worry about, but it’s good to know.

 

An important part of the L.A. is the outlining of the broker’s commission, usually payable to the broker when the property is purchased from any source. This is called an exclusive right-to-sell listing agreement, rather than an exclusive agency listing agreement. The difference is that right-to-sell agreements award commission regardless of who sells the property, whereas agency listings only award the fee if the agent sells the property. You’re much more likely to find exclusive right-to-sell agreements, because it protects your agent’s time and effort.

 

Commission is also payable even if the sale doesn’t go through - but only if the sale fails because of the seller. So, if the seller backs out last minute, they still owe their agent commission.

 

The commission layout is important because it ensures that your agent isn’t afraid to give their seller bad news. They can give advice and information that the seller might not want to hear, without being afraid that they’ll walk.

 

Still, some sellers can get caught up in all of the details, and so thoroughly reading and understanding your contracts before signing is the most important step. If you’re feeling pressured to sign anything you don’t feel is right, try getting a second opinion - some particulars might feel unfair to either the seller or the agent, but there are often good reasons for their inclusion.

Things you May Find in These Agreements

Holdover Period (90 Days)

If an agent introduces a property to a buyer during their contract period, but the buyer buys the property after their contract expires, the agent is still entitled to the commission they would have received. Usually for the period of ninety days after the listing expires.

Rental Commission

Many real estate agents work on behalf of landlords seeking tenants as well as buyers/sellers, so standard agency agreements often include a rental commission. But it can cause confusion in specific situations; say a property isn’t selling, and so the seller decides to privately rent it out. That seller may owe their realtor a commission, even if the realtor was only hired to sell the house.

Failure to Complete

If a buyer fails to complete (follow through on) a valid agreement of purchase or sale, they’re in breach of their contract. They will probably still owe the agent commission. However, if the other party fails to complete the purchase, then the buyer usually isn’t in breach of contract (until the court makes the other party follow through).

Payment of GST

There’s GST on just about everything - including real estate commission.

Neighbor Inquiries

A seller is obligated to refer all inquiries to their agent. If they don’t, it’s a breach of contract. They may still be liable for the agent’s commission, even after the 90 day holdover period.

Sold Sign

You don’t have to have a “sold” sign on your lawn - but it’s nice for your agent to be able to advertise their achievement.

Stolen Merchandise

An agent isn’t responsible if anything is stolen from a property during showings or open houses. It may also say the agent might be responsible in cases of gross negligence.

Disclosure

The agreement requires you to disclose anything that might affect the sale, including title issues, mortgages, easements and more.

Power of Attorney

Some agreements grant the realtor power of attorney. Always read the agreement carefully, because power of attorney is rarely, if ever, necessary.

Binding Agreement

Binding agreements mean any heirs are responsible for the agreement if the principal dies.

Cancellation Prior to Expiration

A listing agreement is enforceable throughout its duration. It cannot be cancelled unless the agent agrees. Any special cancellation arrangements should be specified in writing.

 

The most important thing to remember is to always read over every agreement carefully. Getting a second opinion, whether a lawyer or another realtor, can also be helpful in ensuring your interests are best represented by your agent. You have the right to negotiate with your agent about everything in the agreement, and you can ask for any legally-permitted changes to be made.

 

TL;DR

Read your contracts! The only one you legally have to sign is the Working With A Realtor agreement, but there are many other different types that offer different levels of protection for you and for your realtor. Clients get much better service and protection than customers, but they also might be on the hook for more payments. You can always ask for clarification or to change something in your contract… but make sure you confirm it before you sign!

 

Want More 5 Things?

The Plain-Language Guide to Mortgage Insurance

Investment Properties Vs. Investment for Living

Top 8 Myths Every Landlord and Tenant Should Know

 

Phone: 416-992-7972

Email: info@teamamador.ca

Website: www.teamamador.ca