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Despite of a recent slowdown in Toronto house market, the condo market remains strong in both transaction of buying or/and selling in the Real Estate industry.
Home-buying is considered as one of the most important financial commitments to most of us. As a result, there should be certain client-protection in place when participating in the real estate transaction and retaining a realtor for your property.
The Real Estate Council of Ontario (RECO) regulates all Ontario real estate agents, who are bound to ethical duties and obligations under the REBBA 2002 Code of Ethics, including but not limited to the following:
- Be honest and not to take advantage of the client, including disclosing any conflicting interest or any relevant facts which are essential for client's decision on purchasing or selling the property (Good Faith);
- Promote and protect the interests of the client above all else except the Law (Loyalty);
- Demonstrate reasonable knowledge, skills and experience required for the real estate transaction (Competence);
- Maintain Confidentiality.
On the other hand, some realtors may not willing to work for your property without signing the Buyer Representation Agreement or Listing Agreement, given that earned commission is guaranteed for the service rendered.
The Buyer Representation Agreement (BRA) is a legal binding contract that puts in writing for a realtor to work for a buyer within a certain period of time. BRA usually outlines the buyer's wants and needs for a property, all the services delivered to the client, and how the commission will be paid out. Normally, as a buyer, you don't pay any commission to your realtor directly, rather your realtor will receive the earnings from the home seller. But just in case when the property you are looking at is for a sale by the owner, you may want to include the commission paid to the realtor in BRA when this transaction is complete.
Be aware of the holdover cause in the agreement that a realtor will get compensated appropriately even for your purchasing the property directly from the home seller if during the holdover period ---- a fixed period after the agreement expires--- the property to which the realtor has already introduced and shown to you before the agreement expires.
The Listing Agreement is the agreement between the seller and the Brokerage that permits the real estate agent to sell the property on behalf of the client. This agreement is a binding legal contract, so that the seller should fully understand the implications of what he or she is signing.
The Listing Agreement must indicate both effective date and expiry date of this agreement, describe the service provided, and the commission rate/fee it applies, and how and when this commission/ fee will be paid. This agreement is usually set out the details of the property being offered for sale.
There are two types of agreements that you can take when putting up your property for sale with a real estate agent: (i) exclusive listing and (ii) multiple listing.
In terms of exclusive listing, the realtor is granted to an exclusive access to find a buyer for the client's property; usually for a fixed period of time, normally 30, 60 or 90 days with an option to extend, In terms of multiple listing, a realtor is given the right to list the property on the MLS system, which is available to all members of the real estate boards who participate in the MLS, for a minimum of 60 days. If some other agent finds a buyer, the cooperating brokerage and the listing brokerage split the commission. The seller should also be aware of the "holdover clause" in the listing agreement, which grants the commission to the realtor who introduces the buyer and purchases the client's property within a certain fixed period after the agreement expires.
As a seller, you can only retain another realtor when your exclusive listing agreement has expired. Otherwise, the realtor, who has signed the listing agreement with you first, can claim the commission earned on the property which was sold by the new agent, and the new agent may go after you for his or her lost commission.
If you re-list the property with another realtor under a new agreement after the expiry date of the former listing agreement but during the holdover period, the purchaser who was introduced to the property during the previous listing period decides to buy. As a result, the difference in commission is payable to former listing realtor, only if the commission payable under the new listing agreement is less than the commission payable under the former listing agreement. For example, 1% of the purchase price should be payable to the former listing agent, when 3% of the purchase price payable as commission under the new agreement and 4% of the purchase price payable as commission under the former listing agreement. No commission is payable to the former listing agent, if the commission payable under the new listing agreement is equal or higher than the commission payable under the former listing agreement.
Disclaimer: This information is not intended to be construed as a legal advice, but strictly for information only in this entire website. Please contact Trustworthy Legal Services for your independent legal advice in your particular situation. The first consultation is also required prior to my retainer of your case.
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