Buyer Representation Agreements – Duty of Care – Alberta Real Estate Relationships

1) Customer Status

For purposes of this article, the context is of the buyer. Agency Relationships are the same for a Seller. the term seller may be interpreted as the seller’s brokerage, or if unrepresented by a brokerage, then by the seller.


Gone are the days when you were able to hop in the car with an agent to go look at properties, and hope for the best.   In those days, while customers believed the agent was acting in their best interest, it turns out they almost always worked for the seller, under a sub-agency agreement.  No disclosures to the public were required.  Today, the buyer relationships are very well defined and regulated under the Real Estate Act of Alberta.  Consumers have greater protection but still need to educate themselves, and not just hold out a hope that their agent might bring it up.

Buyer.Representation

When you first have contact with an agent,  your relationship is that of a customer.   This means you will not have the advantages, protection, and services that are associated with an agency relationship until such time as you enter into a written service agreement to become a client. If your agent agrees to provide a customer with ongoing services, you may ask to become a client at any time you feel that representation might be required right up until and including until when you sit down and write an offer.

Until then, the Real Estate Agent still must:

  • act honestly
  • exercise reasonable care when we provide our services to you under this acknowledgment.
  • hold money received in trust, as the Real Estate Act requires.
  • Comply with the Real Estate Act and its regulations and the rules and bylaws of the Real Estate Council of Alberta.

and may, if they choose to:

  • provide some property listings  for your consideration
  • show you some properties
  • Provide you with historical information to enable you to make an informed decision
  • provide agreements of purchase and sale and other relevant forms, and help you complete them.
  • Give you the names of real estate service providers but not recommend any
  • Answer any questions you may have that do not require judgement or opinion
  • present all offers and counter-offers to and from you
  • pass on information that you want them to.
  • keep you informed of progress

If your agent agrees to provided ongoing services to a customer, whether or not any formal Customer Acknowledgement has been signed, he should not use judgment, give you advice or advocate on your behalf, and is not required to act in your best interests. To do so might imply that an agency relationship already exists when in fact it does not.

A Customer Acknowledgment has no start date or end date, and is implied until such time as the Customer converts to a Client.

My experience has been that members of the public who request Customer Status are most often distrustful of the agent, and the ones who are least qualified to represent themselves.  No sooner do they enter into a Customer Status they start asking all sorts of questions  which require and opinion, judgment or advice on behalf of their agent.  Customer Status is not suitable for most relationships for this reason.  Not all agents will agree to work with Customers except perhaps in a very limited capacity.


The standard of care is higher for real estate professionals when representing clients. Because real estate professionals have increased responsibilities when working with clients, this results in a higher standard of care being expected of them. The responsibilities of real estate professionals when working with clients tends to include the following:

Services to clients typically require the discretion, judgement or offering of an opinion.  There is legal obligation which provides for a much higher duty of care and fiduciary obligations for the benefit of clients.

DutyofCare

Types of Buyers Representation Agreements – Terms may vary from client from one client to the next, depending on the scope of the engagement.  For example, a one week term might be too short to get the job done, and a six month term might be too long.  On the other hand, if you have very specific requirements and there is a scarcity of product around that would meet that criteria, a one year term might be indicated. You might also choose to defer this decision until a later time and remain a customer until you are ready to move forward. Whichever you decide, the terms must be worked out, and be acceptable to both you and your agent.  Written Service Agreements are now mandatory for Designated Agency Brokerages. Alternately a Customer Status Acknowledgment should be on file for every transaction.


2) Exclusive Buyer Representation Agreement

  • Has a start date and an end date and a set fee
  • Brokerage is responsible for paying to the buyer any portion of the fee paid by the sellers or their brokerage, which is in excess of the agreed fee to the buyer.  Buyer is responsible for any portion of the agreed fee which is not paid for the by the seller, to the brokerage.
  • Buyer may negotiate any shortfall of the fee offered by the seller, as a term on their Offer to Purchase, or reduce the amount of their offer.
  • If you change your mind about looking for a property, the brokerage may require that they be reimbursed  for reasonable expenses incurred or accessed by your agent.
  • A retainer may be required. If a purchase is made, the retainer is applied against the purchase
  • Buyer may be responsible for reasonable costs if they do not complete a purchase
  • Agent advocates on your behalf, can use judgment, give opinions and advice advice which require discretion, and is  required to act in your best interests at all times

In addition your Agent must

  • provide property listings  for all properties matching your criteria that they have knowledge of
  • show you properties
  • Provide you with options and advice when requested, and exercise judgement
  • Provide you with historical information to enable you to make an informed decision
  • provide agreements of purchase and sale and other relevant forms, and help you complete them.
  • Give you the names of real estate service providers and make recommendations if requested
  • Answer any questions you may have
  • present all offers and counter-offers to and from you
  • pass on information that you want them to.
  • keep you informed of progress
  • perform due diligence with respect to any property you are presenting an offer on



3) Non-Exclusive Buyer Representation Agreement

It is impossible for any agent to be entirely impartial when acting under the terms of a  Non-Exclusive Representation Agreement due to an intrinsic conflict of interest.  This is because commissions being offered by the seller can vary from one property to the next.  For this reason your  agent  may not be comfortable in entering into a Non-Exclusive Representation Agreement and you might not be either.  This option might be suitable when an engagement is very short lived and the scope is not expected to extend beyond the viewing of a limited number of properties before an offer is contemplated, and you wish your agent to provide you with advice and/or opinions regarding the  transaction.

Has a start date and an end date

  • Buyer will not be responsible for payment of a fee in any circumstances.
  • A fee is paid by the Seller or their Brokerage to the Buyer’s Brokerage
  • If you change your mind about looking for a property, the brokerage may require that they be reimbursed  for reasonable expenses incurred.
  • A retainer may be required. If a purchase is made, the retainer is applied against the purchase
  • Buyer may
  •  be responsible for reasonable costs if they do not complete a purchase
  • Agent advocates on your behalf, can use judgment, give opinions and advice advice which require discretion, and is  required to act in your best interests at all times

In addition your Agent must

  • provide property listings  for all properties matching your criteria that they have knowledge of
  • show you properties
  • Provide you with options and advice when requested, and exercise judgement
  • Provide you with historical information to enable you to make an informed decision
  • provide agreements of purchase and sale and other relevant forms, and help you complete them.
  • Give you the names of real estate service providers and make recommendations if requested
  • Answer any questions you may have
  • present all offers and counter-offers to and from you
  • pass on information that you want them to.
  • keep you informed of progress
  • perform due diligence with respect to any property you are presenting an offer on

The basic obligations related to competent service of a real estate professional who is in a representation relationship with a buyer include the following:

  • use best efforts in locating a property in the specified market area that meets the material
  • requirements identified by the buyer and generally to promote the interests of the buyer
    exercise reasonable care and skill in the performance of the agreement
  • take reasonable steps to discover relevant facts pertaining to any property for which the buyer is considering making an offer
  • disclose, in a timely manner, to the buyer all relevant facts known to the industry member affecting a property or transaction
  • advise the buyer to obtain expert advice on matters of importance to the buyer

If there is to be any expectation that your agent will be providing ongoing services, a discussion should be initiated by the agent regarding types of  relationships, and a Written Representation Agreements or Customer Acknowledgment should be entered into whenever possible.

The absence of a written Representation Agreement usually implies that the relationship is that of a Customer and therefore no services or protections that are typically associated under Representation should be expected or provided.

Real Estate Agents who do not have this discussion with Customers as soon as possible and certainly well before presentation of an offer is immanent, or ongoing services are provided, may be in breach of their legal requirement to do so.

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