As a real estate agent, you have a duty to your clients to act in their best interest when it comes to buying a home. This will be a huge purchase for most people, and clients are looking for someone they can trust to help them through the process. For this reason, important ethical guidelines are in place across the country to ensure fair service and trust in real estate professionals.
There are times, however, when this relationship can become complicated, and one such case is known as a dual agency or multiple representation.
When a brokerage or a single agent represents any two clients for a real estate transaction involving the same house, be they buyers or sellers, a conflict of interest arises. This conflict of interest prevents the same level of impartial service that an agent should strive to provide. While not an incredibly common scenario, it is very possible that it may happen to you in your career, especially in brokerages with many agents.
In order to protect clients and yourself, various real estate authorities around the country have outlined rules about how multiple representations must be handled. Agents must be aware of these rules to avoid violating any real estate rules in their province, which can lead to serious career consequences and disappointed clients.
What is dual agency?
A dual agency is a situation where the same party represents two clients in a transaction. This can arise in several ways. You may also see a similar situation being referred to as multiple representations.
Multiple clients under one brokerage
One of the most common forms of multiple representation is when a brokerage represents multiple clients. As a buyer or seller, though you may work with a single agent, those agents work for a brokerage of whom you are technically a client.
In many cases, your agency agreement is made directly with a brokerage, rather than the salesperson you are working with. Because the brokerage has a beneficial interest in any sale its agents make, multiple representation situations can arise even when the prospective buyers use two different agents.
This type of dual agency is easier for clients to come to terms with, as the two agents are ultimately separate parties that should be able to work in their client’s interests despite having the same employer. However, from a legal standpoint, the brokerage, not just the agent, holds a duty to act in the best interest of its clients, creating a conflict of interest.
Multiple clients under a single agent
A more complicated situation arises when a single agent is representing multiple buyers for the same property. In the case of competing buyers, the concern is that having two clients on the same property will prevent them from acting in one or both clients’ best interests. In the case of a single agent representing both buyer and seller, they have a duty to simultaneously get the highest price for their seller and the lowest price for their buyer. There is also the concern that an agent could be biased towards offers from their own client over others.
Despite the clear difficulty that a multiple representation situation presents, there are rules to help ensure that agents maintain ethical standards and provide clients with quality service.
In some cases, it is simple enough to inform the clients that a dual agency situation exists and possibly to receive consent. In other situations, an agent must modify the services and information they are allowed to supply to a client to remain equitable for both parties.
Can an agent represent multiple clients on the same property?
The rules around multiple representations will vary depending on the province you work in, with each provincial real estate authority having its own laws on the topic. In this section, we will look at some of the rules around the country. However, this is just a general overview, and you should consult your region’s specific regulations if you find yourself in such a scenario.
Ontario
In Ontario, multiple representations are allowed by the Real Estate Council of Ontario, with some conditions. The most important thing to know is that if you are entering into a multiple representation situation, you need to inform your clients about the situation as early as possible and let them know about the implications of such a deal.
Then, a brokerage must receive all clients’ written consent to proceed. The deals can proceed if both clients provide informed consent to the situation. However, if either party does not consent, the brokerage must release one or both parties to seek other representation. Similar regulations exist in areas like New Brunswick and Newfoundland, where dual agency is permitted with rules about how an agent must disclose the relationship.
British Columbia
In BC, on the other hand, dual agency is banned in almost all cases. This means a single brokerage may only represent a single buyer or seller in any transaction. There is a rare exception to this rule that covers remote areas that are underserved by licensed real estate agents. In these areas, dual agency is much more likely to occur, and it is impractical to avoid so brokerages can apply for an exemption.
Alberta
Alberta has two kinds of brokerages, a common-law brokerage and a designated agency brokerage. Under a common-law brokerage, agency relationships are formed between a consumer and the brokerage, so working with multiple clients on one transaction represents a conflict of interest. To get around this, a designated agency brokerage forms agency relationships between real estate consumers and their individual agents. This way, a single brokerage can work with multiple clients on the same transaction, provided they each have their own agent. No conflict of interest arises because neither agent has information on the other agents’ clients. In addition, both parties must agree to this arrangement.
Saskatchewan and Manitoba
In Saskatchewan and Manitoba, similar consent rules apply, requiring both clients to agree to a dual agency situation. At the same time, there are restrictions on the kind of information an agent can share with clients, and agents must work to remain impartial.
Nova Scotia
In Nova Scotia, there are multiple different types of agencies as in Alberta. Similarly, in the event of multiple representation, each client needs to have their own designated agent who is impartial and can not share their information with others within the same brokerage.
Otherwise, the brokerage must serve as a transaction brokerage, with limited allowances for the kinds of service, advice, and information they can provide to each party, as well as requiring consent from all involved.
Quebec
Quebec has perhaps the loosest rules on dual agency and does not have any specific rule against it, nor must brokerages acquire consent from their clients, though agents should inform them. However, in general, the real estate code of the province requires agents to remain ethical and neutral whenever possible in the event of a conflict of interest.
Should dual agency be allowed?
The matter of whether or not dual agency should be permitted is a contentious topic in Canadian real estate. The wide variation between each province’s rules on the topic demonstrates that the matter is far from settled, and still, provinces are working on revising their rules. It was only in 2018 that BC banned the practice, and authorities in Ontario have been considering taking a similar approach.
Arguments against dual agency
On the surface, it is clear how a conflict of interest could present problems in a real estate transaction. Though you as an agent might uphold ethics and work to remain neutral in multiple representation situations, this may not be the case for everyone.
And regardless of how you feel as a real estate professional, public perception makes people wary when they know a conflict of interest exists. Especially in our current markets, where housing prices are increasingly high, many are skeptical of any factor that could artificially skew prices even higher or limit their ability to buy in the event of competing offers.
Arguments for dual agency
On the other hand, there are some good reasons why a dual agency should still be allowed. For example, it may be easy in a major city to find plenty of real estate agents to work with any client and avoid conflicts of interest, but this becomes increasingly difficult in smaller communities.
An outright ban would disproportionately affect rural areas that do not have as many options when it comes to agents. Not only would this hamper transactions for clients, but it could also limit the ability of salespeople to make a living. Sure, any agent is free to refuse to work with multiple competing clients, but in an increasingly competitive industry, you can’t blame people for wanting to get work where they can.
There is also the simple matter of consumer choice. As long as every party is informed of the matter and agrees to it, there should be no issue with the practice. In many ways, the matter is similar to blind bidding, which has seen its share of debate in recent years.
Conclusion
The matter of dual agency is far from settled. So long as it remains a possibility in many markets across the country, buyers, sellers, and real estate professionals must stay aware of what it means for them.
In addition, as a working salesperson or real estate broker, you must keep up with local laws to ensure you are up to date on what is and is not allowed.
