“Working With a Realtor” re-post

There were a couple questions about the “Working With a Realtor” disclosure last week, so I’ve reposted an earlier blog post on the subject.  Signing the blue brochure is acknowledgement of disclosure. It is not a contract and does not create an agency relationship.  On its own it does not entitle the disclosing Realtor to a commission from a buyer. 

Here is the original October ’06 post: 

When I list a property or begin working with buyers one of the first things I do is go through what many Realtors call “the Blue Brochure”. Its a very informative document, and everyone interested in real estate should take a few minutes to read it.

While its often called the Blue Brochure, its also commonly called an “Agency Disclosure”, because it explains exactly who does what in a real estate transaction. Almost anyone involved in a real estate transaction in BC as a buyer or seller should receive, read and sign the brochure.

It is NOT a contract. It is NOT an agency agreement. Obtaining a person’s signature on the brochure does not entitle a Realtor to a commission should the person subsequently buy or sell a property (while failure to obtain the signature could result in a Realtor losing the commission on a sale of which he/she was the effective cause).

What exactly do we mean when we say “agency”? To make sense of the term I think we need to go back several years and examine how real estate and the MLS in BC used to be organized. When I got my licence, we used an agency system called “sub-agency”. A Realtor would typically list a property with a Multiple Listing Contract which made the listing agent’s company the agent of the Vendor, and made all member agents of the real estate board “sub-agents” of the listing agent. In the event of a successful sale all agents were paid by the Vendor, and on the basis of the contract all agents worked for the Vendor, and none for the Purchaser.

The problem was that in the real world some agents worked listings and other agents worked buyers and some worked both (as we still do today), and buyers assumed that they had an agent representing them. In fact this was not true, and led to confusion on the part of both Realtors and their principals. It also led some Realtors into a legal cul de sac: on paper they were sub-agents of the vendor, but based on their actions they were agents of the purchaser, and so were exposed to the charge of dual representation.

“Agency” was seen as a solution to this problem. One Realtor would represent the vendor and one would represent the purchaser. A problem remained, however, because of how the agents got paid. Most people involved still thought the vendor paid the commission. The counter argument was raised that while the vendor did pay the commission, it was paid with money that came from the purchaser. The solution was to think of the commission as “transaction driven” rather than paid by any one party.

This allowed us to adopt our current system, in which both buyer and seller (the terms which replaced “vendor” and “purchaser”) had clear agency relationships with Realtors who had clear, non-conflicting relationships with their principals. It also made Buyer Agency contracts much more workable (even if they have not been as widely adopted as they should be). Any comparison of the two systems will, I think, demonstrate the superiority of our current one.

Buyers and sellers generally want a combination of three things: the best price, in the least amount of time, with a minimum of inconvenience. Sometimes they simply think of these three things as “the best deal”. To quote from the Blue Brochure:

“Agents and their salespeople are legally obligated to protect and promote the interests of their principals as they would their own. Specifically,the Agent has the following duties:

1)Undivided loyalty. The Agent must protect the principal’s negotiating position at all times, and disclose all known facts which may affect or influence the principal’s decision.
2)To obey all lawful instructions of the principal.
3)An obligation to keep the confidences of the principal.
4)To exercise reasonable care and skill in performing all assigned duties.
5)To account for all money and property placed in an Agent’s hands while acting for the principal. ”

Any Realtor who works for you is clearly obligated to attempt to get you “the best deal”, although clearly, “best deal” has many definitions.

What does it mean and how does it fit together? The current agency system clearly defines what duties a Realtor owes the buyer or seller, and the Blue Brochure explains it clearly.

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3 Comments

Filed under Blue Agency Brochure

3 responses to ““Working With a Realtor” re-post

  1. coco

    “It is NOT a contract. It is NOT an agency agreement. Obtaining a person’s signature on the brochure does not entitle a Realtor to a commission should the person subsequently buy or sell a property (while failure to obtain the signature could result in a Realtor losing the commission on a sale of which he/she was the effective cause).”

    Your mentioning this is not a contract, but in brackets you state something completely different. What is considered effective cause? (A realtor shows me a house and I choose to put an offer on it with another realtor the very next day, is this effective cause?)

  2. Skeptic

    “Your mentioning this is not a contract, but in brackets you state something completely different. What is considered effective cause? (A realtor shows me a house and I choose to put an offer on it with another realtor the very next day, is this effective cause?)”

    No, this is just unethical, its not illegal.

    What Rob is saying is that if the agent doesn’t show you the blue book and get you to sign a copy, they can be denied their commission later on for failing to fulfil their responsibilities as a realtor.

  3. robchipman

    Coco:

    Sorry to be slow getting back to you. I’ll try to expand on this in a later post.

    First point: the consumer chooses who represents them. You can change at the last minute.
    Second point: compensation is generally agreed upon, in writing, before hand. Generally it is coming from the seller, even if it is “transaction driven”. Most buyers aren’t on the hook for any commission, period.
    Third point: In the beginning there was the listing Realtor, who had a payment agreement with the seller. Then came the 2nd Realtor, who had a standing agreement with the listing Realtor to share commission if certain conditions were fulfilled. The potential buyer than changed her mind, and introduced Realtor #3, who also has a standing agreement to share part of Realtor#1’s commission, again, if certain conditions are fulfilled. Assuming the property sells, the conditions required for sharing the commission are probably fulfilled. The question is: by which Realtor, #2, or #3. The question is not: Doesn’t the buyer have to pay something, or isn’t the buyer forced to act with a particular person? In the absence of a written buyer agency agreement, the answer is likely “no”.

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