Today, in British Columbia’s real estate industry, major changes have taken effect as a result of new rules and disclosure changes from the Real Estate Council of BC. There are many complexities involved but for the purpose of our newsletter here is a basic explanation of the main changes, which are the end of dual agency and new disclosure requirements.
END OF DUAL AGENCY
As of June 15, 2018, a Realtor in BC will no longer be able to represent a buyer client and a seller client in the same real estate transaction. Also, a Realtor in BC will no longer be allowed to represent two or more of their buyer clients who wish to pursue the same property.
Note – there are rare circumstances where dual agency may be allowed*, but this will not apply in Prince Rupert and most other cities or towns in BC.
The end of dual agency is a major transition that we will all have to get used to, because it will affect our relationships with our buyers and sellers.
Therefore, before we first start working with a consumer in real estate, it’s important that we define our relationship and get informed consent with him or her, as to the type of relationship we will have.
As of June 15th, there are two types of relationships a Realtor can have with a consumer**:
A client relationship (also known as sole agency)
A relationship with an unrepresented party (also known as no agency)
A Realtor can no longer enter into a client relationship (sole agency) with both a buyer and seller for the same transaction, because that would be considered dual agency.
Here is the new form that will define the relationship; all Realtors must go over this form with a consumer in real estate before working with him or her.
We have been asked, “Since you (Mike and Nikki) are both Realtors, can the buyer have a client relationship with one of you, and the seller have a client relationship with the other?”. The answer is no. This will not be allowed because we work together as a team (plus we’re husband and wife). This rule will affect all teams across BC.
On another note, the elimination of dual agency raises questions with regards to Realtors showing their listings to a buyer.
Can you show your own listings to a buyer? Yes, we can show our listings to a buyer, but the buyer will have to give informed consent to be an unrepresented party. If we have a client relationship with the buyer and he or she chooses to pursue one of our listings, a conflict will occur because we will already have a client relationship established with the seller of the property.
As Realtors, we can provide unrepresented parties with general market information and facts, but we can’t give advice. Unrepresented parties should not provide to us their motivation, financial qualifications or needs in respect of real estate.
What will happen if the unrepresented buyer decides to pursue one of our listings? He or she can choose to go to another Realtor who can represent him or her in pursuing the property, or he or she can continue with us as an unrepresented party. The scenario where an unrepresented party would request for us to write the offer would be a rare circumstance. The buyer would have to be experienced and fully understand and consent to the risks involved. Essentially, we would be only a messenger for the unrepresented buyer.
What if the unrepresented buyer chooses to pursue a property that is not our listing? Our relationship can change to a client relationship should the buyer choose to pursue a property that is not our listing.
Is your head spinning yet? We have gone through a very quick learning curve on all of these changes and the many forms involved. There are many scenarios that we could get into that we have not discussed here, and we would be happy to talk to you if you have further questions.
*There are rare circumstances where dual agency will be allowed. The Superintendent of Real Estate has provided a narrow exemption to the rule prohibiting dual agency, for rare situations where the trade occurs in remote locations that are under-served by licensees (Realtors) and where an alternative to dual agency would be impracticable. All three conditions must be met in order to qualify under this exemption. “Impracticable” means “not capable of being done.” It does not mean “inconvenient.”
**With the exception of dual agency, which may be allowed in remote locations that are under-served by licensees and where an alternative to dual-agency would be impracticable.
DISCLOSURE TO SELLERS OF EXPECTED RENUMERATION
As of today, each time a Realtor presents an offer (and a counter offer) to their seller client, they must include a completed disclosure form that informs the client about the remuneration the Realtor’s brokerage will receive.
The form explains to the seller:
· the total commission (in dollars) that the listing brokerage would receive if the offer is accepted
· how the commission would be shared with any cooperating brokerage
· any other payment the licensee will receive, or expects to receive, as a result of the trade.
This information will help ensure that sellers are fully informed of the expected remuneration that the brokerage(s) will receive if they accept an offer.
We hope the summary above helps you gain an understanding of these real estate changes. There has been much controversy over them in the industry, but they are happening, and we will adapt! Once again, we’re happy to discuss if you have any concerns or questions.